Which type of budget deficit occurs during a recession?
Understand the Problem
The question is asking to identify the type of budget deficit that typically arises during an economic downturn, specifically a recession. This indicates a focus on economic concepts related to fiscal policy.
Answer
Cyclical deficit
The type of budget deficit that occurs during a recession is a cyclical deficit.
Answer for screen readers
The type of budget deficit that occurs during a recession is a cyclical deficit.
More Information
A cyclical deficit happens because tax revenues decrease and government spending on social support increases during a recession, leading to a temporary imbalance.
Tips
A common mistake is confusing a cyclical deficit with a structural deficit, which exists regardless of economic conditions.
Sources
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