The diagram below shows the budget deficit function for a government in a hypothetical economy. FIGURE 31-1 Refer to Figure 31-1.Initially,suppose real GDP is $100 million and the budget deficit is $4 million,as shown by point A.If the government implements an expansionary fiscal policy by increasing its purchases of goods and services,then

Question

The diagram below shows the budget deficit function for a government in a hypothetical economy.  FIGURE 31-1 Refer to Figure 31-1.Initially,suppose real GDP is $100 million and the budget deficit is $4 million,as shown by point A.If the government implements an expansionary fiscal policy by increasing its purchases of goods and services,then

Quizplus · Accepted Answer

An expansionary fiscal policy, such as an increase in government purchases of goods and services, would increase the budget deficit. This means that the budget deficit function would shift up, resulting in a new point on the graph with a higher budget deficit than point A.

The Diagram Below Shows the Budget Deficit Function for a Government