The cyclically adjusted budget tells us
A) that in a full-employment economy, the federal budget should be in balance.
B) that tax revenues should vary inversely with GDP.
C) what the size of the federal budget deﬁcit or surplus would be if the economy was at full employment.
D) the actual budget deﬁcit or surplus realized in any given year.

Question

Quizplus · Accepted Answer

The cyclically adjusted budget takes into account the fluctuations in GDP and adjusts for the impact of the business cycle on tax revenues and government spending. It gives an estimate of what the federal budget deficit or surplus would be if the economy was at full employment, taking into account the impact of the business cycle on revenues and spending. Therefore, option C is the correct choice.

The Cyclically Adjusted Budget Tells Us