If actual income is $300 billion, potential income is $350 billion, the total surplus is $20 billion, and tax revenue increases with income, then the cyclical deficit can be any of the following except:

Question

Quizplus · Accepted Answer

The cyclical deficit is the difference between potential income and actual income. In this case, the cyclical deficit is $350 billion - $300 billion = $50 billion. The total surplus is $20 billion, so the cyclical deficit cannot be zero. The cyclical deficit cannot be $1 billion or $10 billion because these values are less than the total surplus. The cyclical deficit cannot be $20 billion because this is the value of the total surplus.

If Actual Income Is $300 Billion, Potential Income Is $350