Question

Rather than simply comparing government revenues and tax receipts, analysts are sometimes interested in the "cyclically

adjusted" budget balance.
What does it mean to consider the cyclically adjusted budget balance?
O The cyclically adjusted budget balance accounts for what the budget balance would be in terms of spending patterns attributable to variations in the lunar cycle.
O The cyclically adjusted budget balance accounts for what the budget balance would be in terms of changes in the
budget attributable to a university presidential election cycle.
O The cyclically adjusted budget balance accounts for what the budget balance would be in terms of the total value of
goods and services produced in an economy at the potential output.
O The cyclically adjusted budget balance accounts for decreases in tax revenues that occur during economic expansions
and increases in tax revenues that occur during recessions.

Answer 1

The cyclically adjusted budget balance considers the impact of economic cycles on the budget balance, adjusting for changes in tax revenues during economic expansions and recessions.

Step-by-step explanation:

The term 'cyclically adjusted budget balance' refers to the budget balance that takes into account the impact of economic cycles. It adjusts for the changes in tax revenues that occur during economic expansions and recessions. During economic expansions, tax revenues tend to increase, leading to a smaller budget deficit or a larger budget surplus. Conversely, during recessions, tax revenues decrease, resulting in a larger budget deficit or a smaller budget surplus.