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Consider the Government's Budget Deficit Function, Graphed with Dollars on the Vertical

Question 3

Multiple Choice

Consider the government's budget deficit function, graphed with dollars on the vertical axis and real GDP on the horizontal axis. This function is downward sloping because as real GDP


A) rises, tax revenues fall, decreasing the deficit or increasing the surplus.
B) falls, the budget deficit function shifts down.
C) rises, tax revenues rise, decreasing the deficit or increasing the surplus.
D) falls, tax revenues rise, decreasing the deficit or increasing the surplus.
E) rises, it leads to increasing debt- service payments.

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