When a country's economy is producing at a level that exceeds its potential GDP, the standardized or full employment deficit will show a smaller deficit when compared with the actual deficit.
When the economy is performing extremely well, the standardized or full employment deficit is smaller than the actual budget deficit because the economy is producing about potential GDP, so the automatic stabilizers are increasing taxes and reducing the need for government spending.
A deficit can usually occur when a company, government, or person spends more than it receives in a given period, usually a year or more than that.
Hence, the standardized or full employment deficit will show a smaller deficit.
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