If the Cyclically Adjusted Budget Deficit Increases from $200 Billion

question 50

Multiple Choice

If the cyclically adjusted budget deficit increases from $200 billion to $250 billion and GDP remains constant over the two years:

• A)fiscal policy is expansionary.
• B)fiscal policy is contractionary.
• C)fiscal policy is neutral.
• D)the tax system is progressive.

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Definitions:

Savings

The portion of an individual's or entity's income that is not spent on current expenditures and is instead reserved for future use or investment.

Disposable Income

Money available to families for savings and expenses after accounting for income taxes.

C+ I

An economic term representing total consumption (C) and investment (I) in an economy, key components of the gross domestic product (GDP).

Disposable Income

The amount of money that households or individuals have available for spending and saving after income taxes have been accounted for.