The Diagram Below Shows Two Budget Deficit Functions for a Hypothetical

question 50

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 government implements a fiscal policy that causes the budget deficit function to shift to B1,we can conclude that the policy was ________ and the structural deficit will be ________ than previously.

• A)expansionary; smaller
• B)expansionary; larger
• C)contractionary; larger
• D)contractionary; smaller

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