Figure 5-1
-In the figure above, if the budget line BB0, the natural real GDP is $5300, and actual real GDP is $5000, then the cyclical budget surplus or deficit is the

Question

Figure 5-1 
-In the figure above, if the budget line BB0, the natural real GDP is $5300, and actual real GDP is $5000, then the cyclical budget surplus or deficit is the

Quizplus · Accepted Answer

The cyclical budget surplus or deficit is the difference between actual real GDP and potential real GDP (which is represented by the natural real GDP in this case). The vertical distance between F and D represents the difference between actual real GDP ($5000) and potential real GDP ($5500, which is the point where the budget line intersects with the vertical axis). Therefore, the vertical distance between F and D (which is a negative value in this case) represents the cyclical budget deficit (-$500).

Figure 5-1 -In the Figure Above, If the Budget Line BB0, the Line