The Diagram Below Shows Two Budget Deficit Functions for a Hypothetical

question 40

Multiple Choice

The diagram below shows two budget deficit functions for a hypothetical economy.
FIGURE 32- 2
-Refer to Figure 32- 2. Initially, suppose that 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 contraction and an increase in GDP
• B)a fiscal expansion and a decrease in GDP
• C)a fiscal contraction and a decrease in GDP
• D)an increase in GDP with no change in fiscal policy
• E)a fiscal expansion and an increase in GDP

---

Definitions:

Alveoli

Tiny air sacs in the lungs where the exchange of oxygen and carbon dioxide takes place.

Alveolar Ducts

Tiny ducts in the lungs that connect the bronchioles and alveolar sacs, facilitating gas exchange.

Terminal Bronchioles

The smallest air passages in the lungs that lead to the alveolar ducts, playing a crucial role in the transfer of oxygen and carbon dioxide.

Respiratory Bronchioles

The smallest airways in the respiratory system, through which air passes before reaching the alveolar sacs for gas exchange.