When current government expenditures equal current tax revenues and the economy is achieving full employment,
A) the cyclically adjusted budget has neither a deﬁcit nor a surplus.
B) the cyclically adjusted budget may have either a deﬁcit or a surplus.
C) ﬁscal policy is contractionary.
D) nominal GDP and real GDP are equal.

Question

Quizplus · Accepted Answer

When current government expenditures equal current tax revenues and the economy is achieving full employment, this is known as a balanced budget. The cyclically adjusted budget (which accounts for changes in the economy's output gap) would have neither a deficit nor a surplus in this scenario.

When Current Government Expenditures Equal Current Tax Revenues and the Economy