The Diagram Below Shows Two Budget Deficit Functions for a Hypothetical

question 65

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,how much of the actual budget deficit is due to the underlying structure of fiscal policy and is therefore independent of the current level of GDP?

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

Understand the essential components and categories of a budget in evaluations and research projects.

Comprehend the concept of cost analysis in the context of program evaluation for effectiveness and efficiency.

Recognize the qualifications and training required to conduct evaluations in specialized fields such as occupational and environmental health.

Identify risk scenarios based on severity and likelihood in various settings.

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Definitions:

Rising Prices

A situation where the general level of prices for goods and services in an economy increases over a period of time.

Average Total Cost

The total cost of production divided by the quantity of output, encompassing both fixed and variable costs.

Average Variable Cost

The cost per unit of production that varies with the level of output, calculated by dividing the total variable costs by the number of units produced.

Variable Costs

Expenses that change in proportion to the activity of a business, such as costs for raw materials or production inputs.