Refer to the Data for a ?Ctional Economy

question 232

Multiple Choice

$$\begin{array} { | c | c | c | } \hline \text { Year } & \begin{array} { c } \text { Actual Budget, Percent of GDP } \\\text { (-deficits, +surpluses) }\end{array} & \begin{array} { c } \text { Cyclically-Adjusted Budget, Percent of GDP } \\\text { (-deficits, +surpluses) }\end{array} \\\hline 1 & 0 & 0 \\\hline 2 & - 3 & 0 \\\hline 3 & - 5 & - 2 \\\hline 4 & - 2 & - 2 \\\hline 5 & + 2 & + 1 \\\hline\end{array}$$ Refer to the data for a ?ctional economy. The changes in the budget conditions between Year 2 and 3 best re?ect

• A) demand-pull in?ation.
• B) an expansionary ?scal policy.
• C) a tax increase.
• D) a contractionary ?scal policy.

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Definitions:

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