Think about the difference between a government's structural deficit as opposed to the cyclical deficit
Added by Sara P.
Step 1
This type of deficit is often due to long-term factors such as demographic changes, policy decisions, or economic structure that create a persistent gap between income and spending. Show more…
Show all steps
Your feedback will help us improve your experience
Alejandro Ruiz and 72 other Microeconomics educators are ready to help you.
Ask a new question
Labs
Want to see this concept in action?
Explore this concept interactively to see how it behaves as you change inputs.
Key Concepts
Recommended Videos
An economy is in a recession with a large recessionary gap and a government budget deficit. a. Is the government budget deficit a structural deficit or a cyclical deficit? Explain. b. Explain how automatic fiscal policy is changing the output gap. c. If the government increases its discretionary expenditure, explain how the structural deficit might change.
The economy is growing slowly, the inflationary gap is large, and there is a budget deficit. a. Do we know whether the budget deficit is structural or cyclical? Explain your answer. b. Do we know whether automatic fiscal policy is increasing or decreasing aggregate demand? Explain your answer. c. If a discretionary decrease in government expenditure occurs, what happens to the structural budget balance? Explain your answer.
What are some practical weaknesses of discretionary fiscal policy?
Recommended Textbooks
Principles of Economics
Principles of Microeconomics for AP® Courses
Economics
Transcript
18,000,000+
Students on Numerade
Trusted by students at 8,000+ universities
Watch the video solution with this free unlock.
EMAIL
PASSWORD