Suppose the government's actual budget deficit is equal to the cyclically adjusted budget deficit. Then it must be the case that

Question

Quizplus · Accepted Answer

The cyclically adjusted budget deficit is the budget deficit that would result if the economy were at potential output. If the actual budget deficit is equal to the cyclically adjusted budget deficit, it means that the economy is at full employment and there is no output gap. This also means that the government is not providing any fiscal stimulus to boost the economy, as it is already at its potential.

Suppose the Government's Actual Budget Deficit Is Equal to the Cyclically