The cyclical deficit is the portion of the deficit

Question

Quizplus · Accepted Answer

The cyclical deficit is created by fluctuations in real GDP that cause changes in tax revenues and transfer payments. It is also sometimes referred to as the automatic stabilizer effect. A is not correct because it assumes the economy is at potential real GDP, which is not always the case. B and D refer to discretionary and nondiscretionary federal spending, respectively, which are not related to the cyclical deficit.

The Cyclical Deficit Is the Portion of the Deficit