Multiple Choice
that in a full-employment economy, the federal budget should be in balance.
that tax revenues should vary inversely with GDP.
what the size of the federal budget deficit or surplus would be if the economy was at full employment.
the actual budget deficit or surplus realized in any given year.
1 answer
The correct answer is:
what the size of the federal budget deficit or surplus would be if the economy was at full employment.
The cyclically-adjusted budget focuses on what the budget balance would look like if the economy were operating at its potential output, thus accounting for the effects of the business cycle.
