The structural deficit is that deficit that would exist
A) if there were no discretionary fiscal interventions into the economy.
B) with the taxes and outlays that would occur if the economy was at the full employment level of real GDP.
C) with the taxes and outlays that would occur if the economy was at the equilibrium level of real GDP.
D) if tax rates were set to maximize tax revenues.

Question

Quizplus · Accepted Answer

The structural deficit is defined as the deficit that would exist if the economy was at the full employment level of real GDP without any discretionary fiscal interventions. This means that taxes and outlays would be at their natural levels without any government intervention. Therefore, the correct choice is B - with the taxes and outlays that would occur if the economy was at the full employment level of real GDP.

The Structural Deficit Is That Deficit That Would Exist