In Year 1, the actual budget deficit was $200 billion and the cyclically-adjusted deficit was $150 billion. In Year 2, the actual budget deficit was $225 billion and the cyclically-adjusted deficit was $175 billion. It can be concluded that fiscal policy from Year 1 to Year 2 became more:
A) Proportional
B) Progressive
C) Contractionary
D) Expansionary

Question

Quizplus · Accepted Answer

The increase in both the actual and cyclically-adjusted deficits from Year 1 to Year 2 indicates that fiscal policy became more expansionary, as the government increased its spending or reduced taxes, leading to a larger deficit.

In Year 1, the Actual Budget Deficit Was $200 Billion