Select all the true statements about the federal budget deficit of 2020.

Question

Multiple select question.

It was only slightly larger than the cyclically adjusted deficit for the year.

It was not as large as the 2008 deficit during the Great Recession.

It was the highest federal deficit ever recorded in peacetime.

It reached −5.0 percent of the potential GDP for the year.

Answer 1

Based on the information available regarding the federal budget deficit of 2020, the following statements are true:

1. It was the highest federal deficit ever recorded in peacetime. - This statement is true, as the deficit reached unprecedented levels due to the economic impact of the COVID-19 pandemic.

2. It reached −5.0 percent of the potential GDP for the year. - This statement is also true; the deficit as a percentage of GDP was significant due to the economic downturn and the government’s response.

The other statements are not accurate:

• It was only slightly larger than the cyclically adjusted deficit for the year. - This is not true; the nominal deficit was considerably larger than the cyclically adjusted deficit due to extraordinary spending measures.

• It was not as large as the 2008 deficit during the Great Recession. - This statement is false; the 2020 deficit was larger than the deficit recorded during the Great Recession.

Thus, the true statements are:

• It was the highest federal deficit ever recorded in peacetime.
• It reached −5.0 percent of the potential GDP for the year.