A federal budget deficit caused by a recession and a consequent decline in tax revenues ?
Correct answer: B. Cyclical deficit
- A. Annual deficit
- B. Cyclical deficit
- C. Anticipated deficit
- D. None
Explanation
A cyclical deficit arises during a recession because lower incomes and profits reduce tax collections while government support spending may rise. It varies with the business cycle rather than being a permanently planned deficit.
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