In Year 1, the actual budget deficit was $150 billion and the cyclically adjusted deficit was $125 billion.In Year 2, the actual budget deficit was $125 billion and the cyclically adjusted deficit was $100 billion.It can be concluded that fiscal policy from Year 1 to Year 2 was:

Question

Quizplus · Accepted Answer

The decrease in both the actual and cyclically adjusted deficits from Year 1 to Year 2 indicates a contractionary fiscal policy. This is because the government spent less and/or taxed more in Year 2, resulting in a smaller budget deficit.

In Year 1, the Actual Budget Deficit Was $150 Billion