If the economy is in a recession, the actual deficit is ________ than the full employment deficit.

Question

Quizplus · Accepted Answer

The full employment deficit refers to the amount of government spending required to reach full employment GDP. During a recession, the actual GDP is below the full employment GDP, which means government revenues from taxes are lower than they would be at full employment. At the same time, government spending tends to increase as more people seek unemployment benefits and other assistance. This combination typically leads to a larger deficit in a recessionary economy compared to the full employment deficit.

If the Economy Is in a Recession, the Actual Deficit