The Diagram Below Shows Two Budget Deficit Functions for a Hypothetical

question 6

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 cyclical component of the actual budget deficit would be

• A)$4 million.
• B)$6.5 million.
• C)$7.5 million.
• D)$14 million.
• E)Insufficient information to know.

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Definitions:

Intermediate Product

A product that requires further processing before it becomes a finished good.

Beet Juice

The liquid extracted from beetroot, often used as a natural colorant in food products, or consumed for its nutritional benefits.

Refined Sugar

Sugar that has undergone a process to remove impurities and unwanted components, resulting in pure, crystalline sucrose.

Industrial Fiber

Man-made or natural fibers primarily used in the production of durable goods and industrial products instead of consumer apparel.