A cyclical surplus is a
A) budget surplus only because real GDP is less than potential GDP.
B) budget surplus only because real GDP is greater than potential GDP.
C) budget surplus only because real GDP is equal to potential GDP.
D) nominal, as opposed to real, budget surplus.

Question

Quizplus · Accepted Answer

A cyclical surplus occurs when the economy is performing better than its long-term trend, meaning real GDP is greater than potential GDP. This leads to higher tax revenues and/or lower government spending on welfare benefits, resulting in a budget surplus.

A Cyclical Surplus Is a