Question

What does the government use to measure what the federal budget deficit or surplus would have been under existing tax rates and government spending levels if the economy had achieved its full-employment level of GDP?
Multiple choice question.

Cyclical deficit

Cyclically adjusted budget

Progressive tax

Built-in stabilizer

Answer 1

The correct answer is **Cyclically adjusted budget**.

A cyclically adjusted budget measures what the federal budget deficit or surplus would be under existing tax rates and government spending levels if the economy were operating at its full-employment level of GDP, adjusting for economic fluctuations.