As measured by the cyclically adjusted budget, the U.S. government engaged in a contractionary ﬁscal
policy in 2005 and 2006.

Question

Quizplus · Accepted Answer

The cyclically adjusted budget is designed to measure the stance of fiscal policy by removing the effects of the economic cycle. However, stating that the U.S. government engaged in a contractionary fiscal policy in 2005 and 2006 without specific data on government spending and tax policies relative to the economic cycle is not accurate. During these years, the U.S. economy was in a period of expansion, and fiscal policy was not notably contractionary; in fact, there were tax cuts and increased government spending on certain programs.

As Measured by the Cyclically Adjusted Budget, the U