If the cyclically-adjusted budget shows a deficit zero and the actual budget shows a deficit of about $150 billion, it can be concluded that there is:
A) Built-in stability
B) A cyclical deficit
C) An expansionary fiscal policy
D) A contractionary fiscal policy

Question

Quizplus · Accepted Answer

The difference between the cyclically-adjusted budget and the actual budget is due to the cyclical deficit, meaning that the deficit is a result of the current stage in the business cycle. This suggests that the economy is in a downturn or recession, and the government is spending more to stimulate economic growth and decrease unemployment. Therefore, the correct answer is B - A cyclical deficit.

If the Cyclically-Adjusted Budget Shows a Deficit Zero and the Actual