The Diagram Below Shows Two Budget Deficit Functions for a Hypothetical

question 13

Multiple Choice

The diagram below shows two budget deficit functions for a hypothetical economy. FIGURE 31-2
-Refer to Figure 31-2.Initially,suppose the economy is at point A on budget deficit function .Real GDP (Y) is $100 million.If the level of potential output (Y*) were $300 million,how much of the actual budget deficit is due to the underlying structure of fiscal policy and is therefore independent of the current level of GDP?

• A)$4 million.
• B)$6.5 million.
• C)$7.5 million.
• D)$14 million.
• E)Insufficient information to know.

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Definitions:

Aversion Therapy

A psychological treatment method that involves pairing a harmful stimulus with an undesirable behavior to reduce the behavior.

Time Limited Dynamic Psychotherapy

A form of psychotherapy that focuses on individual psychological processes and stresses the importance of interpersonal relationships, with therapy occurring within a set timeframe.

Behaviour Therapy

A treatment that emphasizes that problem behaviours are learned behaviours and that faulty learning can be reversed through the application of learning principles.

Neurotic Patients

Individuals experiencing neurosis, manifesting as psychological stress, anxiety, or obsessive behavior, without a disconnection from reality.