Suppose that the economy has a structural deficit of $200 billion but is running a budget surplus. It follows that:

Question

Quizplus · Accepted Answer

If the economy has a structural deficit but is running a budget surplus, it means that the cyclical component of the budget must be in surplus. This is because the overall budget balance is the sum of the structural balance and the cyclical balance. If the structural balance is negative (deficit) and the overall balance is positive (surplus), the cyclical balance must be positive enough to not only offset the structural deficit but also create an overall surplus.

Suppose That the Economy Has a Structural Deficit of $200