-Refer to the Above Diagram Where I_g Is Gross Investment,X

question 162

Multiple Choice

-Refer to the above diagram where 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,that 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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