Suppose the federal government had budget deficits of $40 bi…

Suppose the federal government had budget deficits of $40 billion in year 1 and $50 billion in year 2 but had budget surpluses of $20 billion in year 3 and $50 billion in year 4. Also assume that it used its budget surpluses to pay down the public debt. At the end of these four years, the federal government’s public debt would have

YearActual Budget, Percent of GDP (−deficits, +surpluses)Cyc…

YearActual Budget, Percent of GDP (−deficits, +surpluses)Cyclically-Adjusted Budget, Percent of GDP (−deficits, +surpluses)1002−303−5−24−2−25+2+1Refer to the data for a fictional economy. The changes in the budget conditions between Year 2 and 3 best reflect