The Diagram Below Shows Two Budget Deficit Functions for a Hypothetical

question 47

Multiple Choice

The diagram below shows two budget deficit functions for a hypothetical economy. FIGURE 31-2
-Refer to Figure 31-2.Initially,suppose real GDP is $100 million and the budget deficit is $14 million,as shown by point A.Which of the following events could result in a move from point A to point C?

• A)a fiscal expansion and an increase in GDP
• B)a fiscal contraction and an increase in GDP
• C)a fiscal expansion and a decrease in GDP
• D)a fiscal contraction and a decrease in GDP
• E)an increase in GDP with no change in fiscal policy

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Definitions:

Consumption

The usage of goods and services by households or individuals, forming a major component of aggregate demand in an economy.

Income

Income refers to the money received by an individual or entity, typically in the form of wages, salaries, or returns from investments, over a specified period of time.

Interest Rate

The amount charged, expressed as a percentage of principal, by a lender to a borrower for the use of assets.

Bushels

A unit of volume that is used for measuring agricultural produce, such as grain, fruit, or vegetables.