The diagram below shows the budget deficit function for a hypothetical economy.
FIGURE 32- 1
-Refer to Figure 32- 1. Initially, suppose that real GDP is $100 million and the budget deficit is $4 million, as shown by point A on the graph. Which of the following is consistent with a move from point A to point B?

Question

The diagram below shows the budget deficit function for a hypothetical economy.
  FIGURE 32- 1
-Refer to Figure 32- 1. Initially, suppose that real GDP is $100 million and the budget deficit is $4 million, as shown by point A on the graph. Which of the following is consistent with a move from point A to point B?

Quizplus · Accepted Answer

When the economy enters into a boom, real GDP increases, which can lead to a reduction in the budget deficit due to higher tax revenues and lower government spending on welfare programs, consistent with a move from point A to point B.

The Diagram Below Shows the Budget Deficit Function for a Hypothetical