When the economy is at full employment,

Multiple Choice
one cannot generalize in comparing the actual and the cyclically-adjusted budgets.
the cyclically-adjusted budget will show a surplus and the actual budget will show a deficit.
the actual budget will show a surplus and the cyclically-adjusted budget will show a deficit.
the actual and the cyclically-adjusted budgets will be equal.

1 answer

When the economy is at full employment, the actual budget is typically expected to reflect the structural position of the economy without the influence of cyclical fluctuations. The cyclically-adjusted budget accounts for these fluctuations and shows what the budget would look like if the economy were producing at its full potential.

Thus, under full employment conditions, the actual and the cyclically-adjusted budgets will be equal since the economy is neither in a boom nor recession, and there are no cyclical deficits or surpluses affecting the actual budget.

Therefore, the correct choice is:

the actual and the cyclically-adjusted budgets will be equal.