The Diagram Below Shows the Budget Deficit Function for a Hypothetical

question 48

Multiple Choice

The diagram below shows the budget deficit function for a hypothetical economy.
FIGURE 32- 1
-Refer to Figure 32- 1. Initially, suppose that real GDP is $100 million and the budget deficit is $4 million, as shown by point A on the graph. Which of the following is consistent with a move from point A to point B?

• A)the economy entering into a boom
• B)implementation of an expansionary fiscal policy
• C)implementation of a contractionary fiscal policy
• D)the economy entering into a recession
• E)implementation of a contractionary monetary policy

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