Question

If the standardized budget shows a deficit of about $100 billion and the actual budget shows a deficit of about $150 billion, it can be concluded that there is: 
A. Built-in stability
B. A cyclical deficit
C. An expansionary fiscal policy
D. A contractionary fiscal policy

Answer 1

Answer:

The correct answer to the following question is option B) cyclical deficit.

Explanation:

Deficit is a situation which arises in the economy when the government spending or expenses are more than its revenues. Cyclical deficit is one of the types of deficit , which occurs because of the ups and downs that happen in business cycle. This type of deficit arises or alleviates when the economy is not doing well, which means the revenues that government gets from taxes have been reduced and the government spending has also increased because in the economy more people are collecting unemployment checks. So the only way to improve the situation or decrease the cyclical deficit is by improving the economy's situation .

Answer 2

Answer: Option (B) is correct.

Explanation:

The deficit in an economy occurs when the government spending is greater than the government revenue. The cyclical deficit is mostly associated with the cyclical movements occurs in the economy and that is also related with the business cycle fluctuations.

There is an expansion in the economy when the government has more revenue, this is the time at which taxes and revenues are higher.

During the recession times, government's spending exceeds its revenue, so borrowings of government increases.