$$\begin{array} { | c | c | c | }
\hline \text { Year } & \begin{array} { c }
\text { Actual Budget, Percent of GDP } \
\text { (-deficits, } + \text { Surpluses) }
\end{array} & \begin{array} { c }
\text { Cyclically-Adjusted Budget, Percent of GDP } \
\text { (-deficits, } + \text { Surpluses) }
\end{array} \
\hline 1 & 0 & 0 \
\hline 2 & - 3 & 0 \
\hline 3 & - 5 & - 2 \
\hline 4 & - 2 & - 2 \
\hline 5 & + 2 & + 1 \
\hline
\end{array}$$ Refer to the table for a ?ctional economy. The changes in the budget conditions between Year 4 and 5 best re?ect a(n)
A) recession.
B) expansionary ?scal policy.
C) tax increase.
D) contractionary ?scal policy.

Question

$$\begin{array} { | c | c | c | } 
\hline \text { Year } & \begin{array} { c } 
\text { Actual Budget, Percent of GDP } \
\text { (-deficits, } + \text { Surpluses) }
\end{array} & \begin{array} { c } 
\text { Cyclically-Adjusted Budget, Percent of GDP } \
\text { (-deficits, } + \text { Surpluses) }
\end{array} \
\hline 1 & 0 & 0 \
\hline 2 & - 3 & 0 \
\hline 3 & - 5 & - 2 \
\hline 4 & - 2 & - 2 \
\hline 5 & + 2 & + 1 \
\hline
\end{array}$$ Refer to the table for a ?ctional economy. The changes in the budget conditions between Year 4 and 5 best re?ect a(n)
A) recession.
B) expansionary ?scal policy.
C) tax increase.
D) contractionary ?scal policy.

Quizplus · Accepted Answer

The shift from a deficit to a surplus in both the actual and cyclically-adjusted budget suggests a contractionary fiscal policy, as it indicates reduced government spending or increased taxes.

Refer to the Table for a ?Ctional Economy