The diagram below shows two budget deficit functions for a hypothetical economy.
FIGURE 32- 2
-Refer to Figure 32- 2. Initially, suppose the economy is at point A. If the level of potential output were 300, the cyclically adjusted budget deficit would be
A) $14 million.
B) $2 million.
C) negative.
D) positive.
E) -- insufficient information to know.
Correct Answer:
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