The cyclically adjusted surplus as a percentage of GDP is 1 percent in Year 1. This surplus becomes a deﬁcit of 2 percent of GDP in Year 2. It can be concluded that from Year 1 to Year 2,
A) ﬁscal policy turned more expansionary.
B) ﬁscal policy turned more contractionary.
C) GDP increased.
D) GDP decreased.

Question

Quizplus · Accepted Answer

When the cyclically adjusted surplus turns into a deficit, it indicates that fiscal policy has become more expansionary, typically involving increased government spending or decreased taxes to stimulate economic activity.

The Cyclically Adjusted Surplus as a Percentage of GDP Is