The Cyclically Adjusted Deficit as a Percentage of GDP Is

question 66

Multiple Choice

The cyclically adjusted deficit as a percentage of GDP is 2 percent in Year 1.This cyclically adjusted deficit becomes 1 percent of GDP in Year 2.It can be concluded that from Year 1 to Year 2,

• A)fiscal policy was more expansionary.
• B)fiscal policy was more contractionary.
• C)the Federal government is decreasing taxes.
• D)the Federal government is increasing spending.

---

Definitions:

Nominal Interest Rates

The interest rate before adjustments for inflation, representing the face value of borrowing costs.

Inflation Rate

How quickly the average cost of products and services goes up, causing the ability to purchase to decline.

Price/Earnings Ratio

A valuation ratio of a company's current share price compared to its per-share earnings, indicating the dollar amount an investor can expect to invest in a company in order to receive one dollar of that company’s earnings.

Interest Rates

The proportion of a loan charged as interest to the borrower, typically expressed as an annual percentage of the loan outstanding.