During an economic boom, a country's actual real GDP growth rate is 4.5%, which is significantly above its estimated long-term trend growth rate of 2.0%. Despite this strong economic performance, the government records an actual budget deficit of 2.0% of GDP.
Which of the following statements about the country's fiscal position is correct?
The country has a structural budget deficit that is greater than 2.0%2.0\%2.0% of GDP.
The structural budget must be in surplus due to the positive output gap.
The deficit is entirely cyclical and will self-correct when growth returns to the trend rate.
The cyclical budget balance is in deficit, offset by a structural surplus.
68 exam-style questions on OCR A Level Economics Fiscal policy. Each one has a worked solution and a mark scheme showing where the marks go.