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

Question

Quizplus · Accepted Answer

The presence of a structural deficit only tells us about the underlying fiscal position of the government, not about the cyclical components which depend on the current state of the economy. Without information on the economic cycle (expansion or recession), we cannot determine the cyclical deficit or surplus.

Suppose That the Economy Has a Structural Deficit of $200