Question

When the economy is at full employment,

a) the cyclically adjusted budget will show a surplus and the actual budget will show a deficit.
b) the actual budget will show a surplus and the cyclically adjusted budget will show a deficit.
c) one cannot generalize in comparing the actual and the cyclically adjusted budgets.
d) the actual and the cyclically adjusted budgets will be equal.

Answer 1

The correct answer is (D)

Step-by-step explanation:

Actual adjusted budget and cyclically adjusted budget are critical to obtain full employment in the economy. Although, it is quite difficult to achieve full employment rate, but if an economy achieves it, the actual budget is can be equal to cyclically adjusted budget. This means, an economy’s expenditures are exactly equal to spending. It can only be achieved when an economy's GDP is at full potential.