Suppose an economy is currently operating at Potential Real GDP and government expenditure is greater than net tax revenue.In this case,the government has a:
A)structurally balanced budget.
B)cyclical deficit budget balance.
C)structural deficit budget balance.
D)cyclically balanced budget.

Question

Quizplus · Accepted Answer

A structural deficit budget balance occurs when government expenditure exceeds net tax revenue even when the economy is operating at Potential Real GDP. This suggests that the government needs to adjust its expenditures and/or revenue policies in order to achieve a structurally balanced budget. A cyclical deficit budget balance, on the other hand, occurs when government expenditure exceeds net tax revenue due to a temporary downturn in the economy.

Suppose an Economy Is Currently Operating at Potential Real GDP