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:

Reserve Ratio

The fraction of deposits that a bank is required to hold in reserve and not lend out, as mandated by the central bank.

Goldsmith's Receipts

Historical documents representing deposits made with goldsmiths that evolved into a form of early banking, where receipts functioned as proof of money or valuables deposited for safekeeping.

Money Supply

The aggregate amount of monetary assets available within a country, encompassing notes, coins, and digital balances, influencing an economy's inflation and interest rates.

Basic Money Supply

Refers to the total volume of money available in the economy, typically including cash and easily accessible funds.