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

If the government implements an expansionary fiscal policy by increasing its purchases of goods and services, it will increase its spending and hence, will increase the budget deficit. This will lead to a shift up in the budget deficit function. Therefore, the correct choice is D.

The Diagram Below Shows the Budget Deficit Function for a Government