The Diagram Below Shows the Budget Deficit Function for a Hypothetical

question 36

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. If the government implements an expansionary fiscal policy by increasing its purchases of goods and services, then

• A)the budget deficit function would shift down.
• B)the size of the budget deficit would decrease as we move from point A to point B.
• C)the budget deficit function would become steeper.
• D)the budget deficit function would shift up.
• E)the budget deficit function would become flatter.

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