If the economy has a cyclically adjusted budget surplus, this means that
A) the public sector is exerting an expansionary impact on the economy.
B) tax revenues would exceed government expenditures if full employment were achieved.
C) the actual budget is necessarily also in surplus.
D) the economy is actually operating at full employment.

Question

Quizplus · Accepted Answer

A cyclically adjusted budget surplus takes into account the impact of the business cycle on tax revenues and government expenditures. It indicates what the budget would approximately look like at full employment. If there is a cyclically adjusted budget surplus, it means that tax revenues would exceed government expenditures if full employment were achieved.

If the Economy Has a Cyclically Adjusted Budget Surplus, This