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Economics glossary · Policy and the financial sector

Cyclical deficit

What cyclical deficit means in economics, as one of the two parts of a deficit, with an example and a question to test yourself.

Definition
Cyclical deficit
The cyclical deficit is the part of the deficit caused by a weak economy, as tax receipts fall and welfare spending rises, and it disappears as activity returns to normal.
Example

Can you think of an example of cyclical deficit?

Test yourself

Can you name the two parts of a budget deficit?

Learn it properly: the module

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