When the economy is at full employment,
A) one cannot generalize in comparing the actual and the cyclically adjusted budgets.
B) the cyclically adjusted budget will show a surplus and the actual budget will show a deﬁcit.
C) the actual budget will show a surplus and the cyclically adjusted budget will show a deﬁcit.
D) the actual and the cyclically adjusted budgets will be equal.

Question

Quizplus · Accepted Answer

When the economy is at full employment, the actual and the cyclically adjusted budgets will be equal because the cyclically adjusted budget is designed to show what the budget balance would be if the economy were at full employment, thus eliminating the effects of the economic cycle on the budget.

When the Economy Is at Full Employment