The Diagram Below Shows Two Budget Deficit Functions for a Hypothetical

question 28

Multiple Choice

The diagram below shows two budget deficit functions for a hypothetical economy.
FIGURE 31-2
-Refer to Figure 31-2.Initially,suppose the economy is at point A on budget deficit function B0.Real GDP (Y) is $100 million.If the level of potential output (Y*) were $300 million,the structural budget deficit would be

• A)$2 million.
• B)$14 million.
• C)measured by the vertical distance between the horizontal axis and B0 (at real GDP = 300).
• D)measured by the vertical distance between point A and the budget deficit that would exist at real GDP = 300 million.
• E)Insufficient information to know.

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