Economists refer to a budget deﬁcit that exists when the economy is achieving full employment as a
A) cyclical deﬁcit.
B) cyclically adjusted deﬁcit.
C) natural deﬁcit.
D) nonrecurring deﬁcit.

Question

Quizplus · Accepted Answer

A budget deficit that exists when the economy is achieving full employment is referred to as a cyclically adjusted deficit. This type of deficit takes into account the changes in government spending and tax revenue that are a result of changes in the business cycle, and adjusts for them to determine what the deficit would be if the economy were operating at a normal level. This measure is important because it allows policymakers to gauge the sustainability of government spending and borrowing over the long term.

Economists Refer to a Budget Deﬁcit That Exists When the Economy