If the cyclically adjusted budget has a zero deﬁcit but the actual budget has a $100 billion deﬁcit, then
that means that the government is pursuing an expansionary ﬁscal policy.

Question

Quizplus · Accepted Answer

A cyclically adjusted budget with a zero deficit indicates that the government's fiscal stance is neutral when the economy is at its potential level. A $100 billion actual deficit could result from lower revenues or higher spending due to economic downturns, not necessarily an active expansionary fiscal policy.

If the Cyclically Adjusted Budget Has a Zero Deﬁcit but the Actual