The cyclically adjusted deficit as a percentage of GDP is 2 percent in Year 1.This cyclically adjusted deficit becomes 1 percent of GDP in Year 2.It can be concluded that from Year 1 to Year 2,
A)fiscal policy was more expansionary.
B)fiscal policy was more contractionary.
C)the Federal government is decreasing taxes.
D)the Federal government is increasing spending.

Question

Quizplus · Accepted Answer

A decrease in the cyclically adjusted deficit as a percentage of GDP indicates that fiscal policy was more contractionary, as it suggests a reduction in the deficit through either increased taxes or decreased spending.

The Cyclically Adjusted Deficit as a Percentage of GDP Is