A government implements an expansionary discretionary fiscal policy during a period of economic recovery, while automatic stabilisers are simultaneously reducing cyclical borrowing. Which of the following correctly describes the impact on the structural deficit and the actual budget deficit?
The structural deficit will increase, while the actual budget deficit could increase, decrease, or remain unchanged.
The structural deficit will decrease, while the actual budget deficit will definitely decrease.
The structural deficit will increase, while the actual budget deficit will definitely increase.
The structural deficit will remain unchanged, while the actual budget deficit will decrease.
