Use the figure below to answer the following questions.
Figure 13.3.1
-Refer to Figure 13.3.1, which shows the outlays and revenues for the government of Pianoland.If potential GDP is $750 billion, and actual real GDP is $650 billion, the cyclical deficit is
A)equal to the structural deficit.
B)$180 billion.
C)$60 billion.
D)$40 billion.
E)zero.

Question

Use the figure below to answer the following questions.
  Figure 13.3.1
-Refer to Figure 13.3.1, which shows the outlays and revenues for the government of Pianoland.If potential GDP is $750 billion, and actual real GDP is $650 billion, the cyclical deficit is
A)equal to the structural deficit. 
B)$180 billion. 
C)$60 billion. 
D)$40 billion. 
E)zero.

Quizplus · Accepted Answer

The cyclical deficit refers to the portion of the budget deficit that is a result of the economic cycle, particularly during periods of lower-than-potential GDP. It is calculated based on the difference between actual and potential GDP. Without the specific details from Figure 13.3.1, a general explanation is that when actual GDP is below potential GDP, as in this case ($650 billion actual vs. $750 billion potential), the government's revenues are likely lower than they would be at potential GDP, leading to a higher deficit that is cyclical in nature. The specific amount ($60 billion) would be determined by the details in the figure, such as tax rates and government spending patterns, which affect how the deficit changes with GDP.

Use the Figure Below to Answer the Following Questions