Figure 17-10 shows the actual budget deficit and the cyclically adjusted budget deficit as a percentage of GDP in the United States from 1965 to 2018. Assuming that potential output was unchanged, use this figure to determine which of the years from 1990 to 2018 the government used expansionary fiscal policy and in which years it used contractionary fiscal policy.

Data From Figure 17-10:-

Transcribed Image Text:

Budget deficit (percent of potential GDP) 10% -2 -4 0 4 2 9 8 00 1965 1970 1975 1980 1985 Cyclically adjusted budget deficit 1990 Actual budget deficit 1995 2000 2005 2010 2015 2018 Year