The diagram below shows two budget deficit functions for a hypothetical economy. Budget Deficit (millions of dollars) 14 7.5 Real GDP (millions of dollars) 100 200 300 400 500 600 700 Budget Surplus (millions of dollars) Bo FIGURE 31-2 FIGURE 31-2 Refer to Figure 31-2. Initially, suppose real GDP is $100 million and the budget deficit is $14 million, as shown by point A. Which of the following events could result in a move from point A to point C? A) a fiscal contraction and a decrease in GDP

The diagram below shows two budget deficit functions for a hypothetical economy. Budget Deficit (millions of dollars) 14 7.5 Real GDP (millions of dollars) 100 200 300 400 500 600 700 Budget Surplus (millions of dollars) Bo FIGURE 31-2 FIGURE 31-2 Refer to Figure 31-2. Initially, suppose real GDP is $100 million and the budget deficit is $14 million, as shown by point A. Which of the following events could result in a move from point A to point C? A) a fiscal contraction and a decrease in GDP

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter30: Government Budgets And Fiscal Policy

Section: Chapter Questions

Problem 30RQ: Under what general macroeconomic circumstances might a government use expansionary fiscal policy?...

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Under what general macroeconomic circumstances might a government use expansionary fiscal policy? When might it use contractionary fiscal policy?
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