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.

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