Figure 13-10 shows the actual budget deficit and the cyclically adjusted budget deficit as a percentage of GDP in Canada from 1980-1981 to 2015-2016. Assuming that potential output was unchanged, use this figure to determine in which years from 1980-1981 to 2015-2016 the government used expansionary fiscal policy and in which years it used contractionary fiscal policy.

Figure 13-10

Transcribed Image Text:

Annual budget deficit, cyclically adjusted budget deficit (percent of GDP) 10% Actual budget deficit Cyclically adjusted budget deficit -2 1981 1990 2000 2005 2010 1985 1995 2016