Without a change in discretionary fiscal policy, we would expect that if the economy goes into recession, then the
A)cyclically adjusted deficit and the actual deficit would both increase.
B)cyclically adjusted deficit and the actual deficit would both decrease.
C)cyclically adjusted deficit would stay the same while the actual deficit would increase.
D)cyclically adjusted deficit would increase while the actual deficit would stay the same.

Question

Quizplus · Accepted Answer

In a recession, tax revenues fall and government spending on benefits rises automatically, increasing the actual deficit. The cyclically adjusted deficit remains unchanged as it reflects the deficit under normal economic conditions, not influenced by the business cycle.

Without a Change in Discretionary Fiscal Policy, We Would Expect