The cyclically adjusted budget deficit or surplus measures what the deficit or surplus would be if the economy were
A) in the recession phase of the business cycle.
B) in the expansion phase of the business cycle.
C) at potential GDP.
D) no longer in a business cycle.

Question

Quizplus · Accepted Answer

The cyclically adjusted budget deficit or surplus measures what the deficit or surplus would be if the economy were at potential GDP, which means it would not be influenced by the fluctuations of the business cycle. This measure takes into account the effects of automatic stabilizers, such as changes in tax revenues and welfare spending, and provides a more accurate assessment of the government's fiscal position over the long-term.

The Cyclically Adjusted Budget Deficit or Surplus Measures What the Deficit