4.5

• How does a cyclical deficit occur?


  Occurs because government spending in revenue fluctuate through the economic cycle i.e in a recession
• How does a structural deficit occur?


  Occurs when the cyclical deficit is zero at the top of a boom if an economy goes through a full economic cycle and stays in deficit throughout then it has a structural deficit.
• How is actual deficit calculated?


  Cyclical deficit plus structural deficit
• How to decrease budget deficit?


  Reduce government spending. Increased tax rate. However, this will cause withdrawal, which could worsen the budget balance.

  Economic growth, however, depends how achieved if through expansionary Montrey policy will not increase a deficit, whereas expand fiscal policy will
• How to reduce debt


  Reducing a deficit/targeting a surplus