If you were told that the government had an actual budget deﬁcit of $50 billion, then you would
A) know that ﬁscal policy was expansionary.
B) know that ﬁscal policy was contractionary.
C) know that ﬁscal policy was producing a cyclical deﬁcit.
D) not be able to determine the direction of ﬁscal policy from the information given.

Question

Quizplus · Accepted Answer

The actual budget deficit alone does not indicate whether fiscal policy is expansionary or contractionary, as it does not distinguish between structural and cyclical components of the deficit.

If You Were Told That the Government Had an Actual