Question
What is the federal budget deficit that is caused by a recession and the consequent decline in tax revenues?
Multiple choice question.
Public debt
Cyclically adjusted budget
Stabilizing deficit
Cyclical deficit
Multiple choice question.
Public debt
Cyclically adjusted budget
Stabilizing deficit
Cyclical deficit
Answers
GPT-4o mini
The correct answer is **Cyclical deficit**.
A cyclical deficit occurs due to a recession when economic activity decreases, leading to a decline in tax revenues and an increase in government spending on safety net programs.
A cyclical deficit occurs due to a recession when economic activity decreases, leading to a decline in tax revenues and an increase in government spending on safety net programs.