Question

Economists refer to a budget deficit that exists when the economy is achieving full employment as a:cyclically adjusted deficit.nonrecurring deficit.cyclical deficit.natural deficit.

Answer 1

Answer:

The correct answer is: cyclically adjusted deficit.

Explanation:

The cyclically adjusted budget deficit can be defined as the budget deficit that exists when the economy is operating at its full potential or at full employment level.  

It is caused because of economic slowdown and not changes in fiscal policies. The economists use the cyclically adjusted budget to evaluate the effects of fiscal policies.  

When there is a cyclically adjusted budget deficit, the fiscal policy is expansionary.