If the economy has a cyclically adjusted budget surplus, this means that:
A)the public sector is exerting an expansionary impact upon the economy.
B)tax revenues would exceed government expenditures if full employment were achieved.
C)the actual budget is necessarily also in surplus.
D)the economy is actually operating at full employment.

Question

Quizplus · Accepted Answer

A cyclically adjusted budget surplus takes into account the impact of the business cycle on government revenues and expenditures. If the economy were at full employment, tax revenues would exceed government expenditures, resulting in a budget surplus. Therefore, a cyclically adjusted budget surplus indicates that if the economy were at full employment, there would be a budget surplus.

If the Economy Has a Cyclically Adjusted Budget Surplus, This