The diagram below shows two budget deficit functions for a hypothetical economy.
FIGURE 32- 2
-Refer to Figure 32- 2. Initially, suppose that 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 an increase in GDP
B) a fiscal expansion and a decrease in GDP
C) a fiscal contraction and a decrease in GDP
D) an increase in GDP with no change in fiscal policy
E) a fiscal expansion and an increase in GDP
Correct Answer:
Verified
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