An economy is in a recession with a large recessionary gap and a government budget deficit. a.
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An economy is in a recession with a large recessionary gap and a government budget deficit.
a. Is the government budget deficit a structural deficit or a cyclical deficit? Explain.
b. Explain how automatic fiscal policy is changing the output gap.
c. If the government increases its discretionary expenditure, explain how the structural deficit might change.
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a A government budget deficit could be either structural or cyclical or a combination of both but in a recession the cyclical component of the deficit ...View the full answer
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