Cyclically Adjusted Budget Deficit  

A budget deficit is the amount that the government has to borrow from the private sector. It is the amount that government spending exceeds tax revenues.

In a recession, the amount of borrowing will increase because:

  • less income tax and VAT revenues
  • Higher spending on unemployment benefits.

The cyclically adjusted budget deficit PSNCR takes into account these changes in the business cycle to give an underlying deficit.

This entry was posted in . Bookmark the permalink.
By on November 28th, 2012