-Using the above figure, if full employment occurs at $16 trillion, but the economy is actually producing $17 trillion, then there is a

Question

Quizplus · Accepted Answer

When the economy is producing more than the full employment output ($17 trillion vs. $16 trillion), it indicates that the economy is overheating or operating above its potential, leading to a cyclical surplus. This surplus occurs because tax revenues increase with higher income levels and government spending does not increase as much, leading to a surplus situation in the cyclical component of the budget.

-Using the Above Figure, If Full Employment Occurs at $16