Economists Refer to a Budget Deficit That Exists When the Economy

question 2

Multiple Choice

Economists refer to a budget deficit that exists when the economy is achieving full employment as a

• A)cyclical deficit.
• B)cyclically adjusted deficit.
• C)natural deficit.
• D)nonrecurring deficit.

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Definitions:

Domestic Deflation

A decline in the general price level of goods and services within a domestic economy over a period of time.

Exports and Imports

Describes goods and services sold to other countries (exports) and goods and services purchased from other countries (imports).

Flexible Exchange Market

A foreign exchange system where the value of currencies are determined by market forces without direct government intervention.

Equilibrium Exchange Rate

The exchange rate at which the demand for a currency equals its supply in the foreign exchange market, resulting in a stable market price.