The Diagram Below Shows the Budget Deficit Function for a Government

question 84

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.

---

Definitions:

Target Net Income

The income objective set by management.

Required Sales

The amount of sales a company needs to achieve in order to cover all its costs and reach its break-even point.

Variable

An element or factor that is subject to change or variation, often used in financial analysis or scientific experiments.

Fixed

Refers to expenses that do not change with the level of production or sales, such as rent, salaries, and insurance premiums.