The Diagram Below Shows the Budget Deficit Function for a Government

question 102

Multiple Choice

The diagram below shows the budget deficit function for a government in a hypothetical economy. FIGURE 31-1 Refer to Figure 31-1.Initially,suppose real GDP is $100 million and the budget deficit is $4 million,as shown by point A.If the government implements a contractionary fiscal policy by decreasing its purchases of goods and services,then

• A)the budget deficit function would shift up.
• B)the budget deficit function would shift down.
• C)the budget deficit function would become steeper.
• D)the budget deficit function would become flatter.
• E)the size of the budget deficit would decrease as we move from point A to point B.

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Definitions:

Cash-to-cash Cycle

The time period between when a business pays for its inventory and when it receives cash from the sale of that inventory.

Timing

The selection of the most appropriate point or period to initiate or execute an action to achieve the desired outcome.

Open-book Management

A management strategy where employees are given access to financial information about the company to involve them more in its operations.

Macro-aging Schedule

A method used in financial analysis that categorizes accounts receivable or other financial assets based on the period of time they have been outstanding.