Refer to the Diagram Given Below

question 219

Multiple Choice

Refer to the diagram given below. In the above diagram I_g is gross investment, X is exports, G is government purchases, S and S_a are saving before and after taxes, respectively.M is imports, and T is net taxes, which is taxes less transfers.The effect of the public budget is to:

• A)lower the equilibrium level of GDP from Y₄ to Y₂.
• B)raise the equilibrium level of GDP from Y₂ to Y₄.
• C)lower the equilibrium level of GDP from Y₄ to Y₃.
• D)raise the equilibrium level of GDP from Y₂ to Y₃.

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