A Cyclical Deficit Occurs When

question 4

Multiple Choice

A cyclical deficit occurs when

• A)there is a deficit due to the fact real GDP is less than potential GDP.
• B)government outlays are greater than revenues.
• C)there is a deficit due to the fact real GDP is greater than potential GDP.
• D)there is a deficit even when real GDP equals potential GDP.
• E)government outlays are less than revenues.

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Definitions:

Opportunity Cost

The cost of forgoing the next best alternative when making a decision, representing the benefits one could have received by taking a different action.

Variable Cost

Costs that directly correspond with the degree of production or output levels.

Period Costs

Costs that are not directly tied to production and are expensed in the period in which they are incurred, such as selling, general, and administrative expenses.

Financial Reporting

The process of producing statements that disclose an organization's financial status to management, investors, and the government, including balance sheets, income statements, and cash flow statements.