Federal Budget Deficit Expected to Nearly Double

EconEye Admin

3 years ago

The nation’s fiscal imbalance remains a concern. The federal budget deficit is expected to balloon to about $2 trillion for fiscal year 2023. Though budget deficits typically shrink when the economy is growing, the current deficit is high although the economy is strong.—cnn.com

Answer the following questions to check your understanding of the story.

What is the nation’s fiscal imbalance?

The nation’s fiscal imbalance is ____________.

a) equal to the government budget deficit

b) the present value of the government’s commitments to pay benefits minus the present value of its tax revenues

c) the unequal allocation of tax burdens and benefits across current and future generations

d) equal to the government debt

Wrong! - To assess the full extent of the government’s obligations, economists use the concept of fiscal imbalance. What calculation determines the full extent of the government’s obligations?

Correct! - The nation’s fiscal imbalance is the present value of the government’s commitments to pay benefits minus the present value of its tax revenues. The fiscal imbalance is an attempt to measure the scale of the government’s true liabilities.

Why is the current deficit “high” when the economy is close to full employment?

The current deficit is “high” because ____________.

a) the structural deficit is large

b) the cyclical deficit is large

c) the cyclical deficit is greater than the structural surplus

d) the economy has both a large structural deficit and a large cyclical deficit

Wrong! - What is a cyclical deficit? What is a structural deficit?

Well Done! - The structural deficit is the budget deficit that occurs if the economy is at full employment. With the economy close to full employment, the deficit is almost entirely a structural deficit.

Share this: