An increase in the cyclical deﬁcits will automatically increase the cyclically adjusted budget deﬁcit.

Question

Quizplus · Accepted Answer

Cyclical deficits are fluctuations in the budget deficit that occur due to changes in the economic cycle, while the cyclically adjusted budget deficit is an estimate of the budget deficit adjusted for the effects of the economic cycle. An increase in cyclical deficits does not automatically increase the cyclically adjusted budget deficit, as the latter is designed to show what the deficit would be under normal economic conditions, removing cyclical factors.

An Increase in the Cyclical Deﬁcits Will Automatically Increase the Cyclically