Refer to the above diagram wherein T is tax revenues and G is government expenditures.All figures are in billions.The budget will entail a deficit:
A)at all levels of GDP.
B)at any level of GDP above $400.
C)at any level of GDP below $400.
D)only when GDP is stable.

Question

Refer to the above diagram wherein T is tax revenues and G is government expenditures.All figures are in billions.The budget will entail a deficit:
A)at all levels of GDP. 
B)at any level of GDP above $400. 
C)at any level of GDP below $400. 
D)only when GDP is stable.

Quizplus · Accepted Answer

At any level of GDP below $400, government expenditure will be greater than tax revenue resulting in a deficit. At GDP levels above $400, tax revenues will exceed government expenditure resulting in a surplus. Therefore, the budget will entail a deficit at any level of GDP below $400.

Refer to the Above Diagram Wherein T Is Tax Revenues