Use the figure below to answer the following questions.

Figure 29.3.1
-Refer to Figure 29.3.1, which shows the outlays and revenues for the government of Pianoland. If potential GDP is $750 billion, and actual real GDP is $650 billion, the cyclical deficit is

Question

Use the figure below to answer the following questions.
  
Figure 29.3.1
-Refer to Figure 29.3.1, which shows the outlays and revenues for the government of Pianoland. If potential GDP is $750 billion, and actual real GDP is $650 billion, the cyclical deficit is

Quizplus · Accepted Answer

The cyclical deficit is the difference between actual real GDP and potential GDP multiplied by the government spending multiplier. In this case, the cyclical deficit is ($750 billion - $650 billion) x 1 = $100 billion. However, the government is running a surplus of $40 billion, so the cyclical deficit is actually $100 billion - $40 billion = $60 billion.

Use the Figure Below to Answer the Following Questions