Refer to the diagram below. If the full employment level of GDP for this economy is at H, the:

Question

Quizplus · Accepted Answer

At full employment level of GDP (H), the economy will be producing at its potential output level and the cyclical deficit will disappear. However, the actual budget will still reflect any structural or non-cyclical imbalance between government revenue and spending. Therefore, the actual budget may still produce a deficit at full employment level of GDP.

Refer to the Diagram Below