Question

A) What is the cyclical deficit, and when is it appropriate to have such a deficit? Why?

B) How do automatic stabilizers, on both the expenditure and revenue sides of the budget, respond during a recession?

C) Use the table below to answer the following questions. The federal deficit fell from $1,300 billion in 2011 to $680 billion in 2013. How much of this change was due to the growing economy? How much of this change was the result of fiscal restraint ?

Fiscal Year	Budget Balance	=	Cyclical Component	+	Structural Component
2000	236		58		178
2001	128		−1		129
2002	−158		−83		−75
2003	−378		−107		−271
2004	−413		−58		−355
2005	−318		−20		−298
2006	−248		-11		−259
2007	−161		-17		−178
2008	−459		−26		−433
2009	−1,413		−251		−1,162
2010	−1,294		−300		−994
2011	−1,300		−254		−1,046
2012	−1,087		−191		−896
2013	−680		−189		−491

Answer 1