Which of the following relationships is correct?
A) cyclical surplus = actual budget deficit - cyclical deficit
B) cyclical deficit = actual budget deficit + structural deficit
C) actual budget deficit = structural deficit + cyclical deficit
D) actual budget deficit = structural deficit - cyclical deficit

Question

Quizplus · Accepted Answer

The actual budget deficit is the difference between government spending and revenue in a given period. This can be broken down into structural deficit (which exists even at full employment) and cyclical deficit (which occurs due to economic downturns). Thus, the correct relationship is actual budget deficit = structural deficit + cyclical deficit.

Which of the Following Relationships Is Correct