Question

Potential GDP of​ $12 trillion and if real GDP equaled potential​ GDP, the budget deficit would be​ $1 trillion.

Real GDP actually equals​ $14 trillion and the budget surplus is​ $3 trillion.

The economy has a structural​ ______ and a cyclical​ ______.

A. surplus of​ $3 trillion; surplus of​ $2 trillion

B. deficit of​ $1 trillion; surplus of​ $2 trillion

C. surplus of​ $4 trillion; deficit of​ $1 trillion

D. deficit of​ $1 trillion; surplus of​ $4 trillion

Answer 1

Answer:

D. deficit of​ $1 trillion; surplus of​ $4 trillion

Explanation:

If the economy reaches their potential at 12 trillion the government would run a deficit of 1 trilllon which means there is an structural deficit of 1 trillion

As currently there is a surplus of 3 trillion This mean the economy is in a cycle under which there is a surplus of 4 trillion

current budget - structural budget = cyclical

3  - (-1) = 3 + 1 = 4