The cyclically-adjusted budget deficit in an economy is zero. If this economy goes into recession, then the actual government budget will be:

Question

Quizplus · Accepted Answer

During a recession, the economy experiences a decline in economic activity, resulting in lower tax revenues and increased government spending on unemployment benefits and other welfare programs. As a result, the actual government budget is likely to go into deficit, even if the cyclically-adjusted budget deficit was previously zero.

The Cyclically-Adjusted Budget Deficit in an Economy Is Zero