Suppose the federal budget deficit for the year was $100 billion and the economy was in a recession.If the economy had been at potential GDP,it is estimated that tax revenues would have been $60 billion higher and government spending on transfer payments $50 billion lower.Using these estimates,the cyclically adjusted budget

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Quizplus · Accepted Answer

The cyclically adjusted budget is calculated by adjusting the actual budget deficit for the effects of the economic cycle. If tax revenues were $60 billion higher and government spending $50 billion lower at potential GDP, the deficit would be $100 billion - $60 billion - $50 billion = $10 billion surplus.

Suppose the Federal Budget Deficit for the Year Was $100