Refer to the diagram below.If the full employment level of GDP for this economy is at H, the:
A)cyclically adjusted budget will produce a surplus.
B)cyclically adjusted budget will produce a deficit.
C)actual budget will produce a deficit.
D)actual budget will produce a surplus.

Question

Refer to the diagram below.If the full employment level of GDP for this economy is at H, the: 
A)cyclically adjusted budget will produce a surplus. 
B)cyclically adjusted budget will produce a deficit. 
C)actual budget will produce a deficit. 
D)actual budget will produce a surplus.

Quizplus · Accepted Answer

At full employment level of GDP (H), the actual budget will be in deficit due to the government spending more than it is able to collect in taxes. The cyclically adjusted budget, which takes into account the economic cycle and adjusts for changes in tax revenue and government spending, may still show a surplus or balanced budget. However, this is not the case for the actual budget.

Refer to the Diagram Below