If the full-employment GDP for the above economy is at L, the:
A)actual budget will entail a deficit.
B)cyclically adjusted budget will entail a deficit.
C)actual budget will entail a surplus.
D)cyclically adjusted budget will entail a surplus.

Question

If the full-employment GDP for the above economy is at L, the:
A)actual budget will entail a deficit. 
B)cyclically adjusted budget will entail a deficit. 
C)actual budget will entail a surplus. 
D)cyclically adjusted budget will entail a surplus.

Quizplus · Accepted Answer

If full-employment GDP is at L, the economy is operating at potential output, and there is no cyclical unemployment. Therefore, the cyclically adjusted budget should be balanced or in surplus.

If the Full-Employment GDP for the Above Economy Is at L