If the full-employment deficit as a percentage of GDP is zero in one year, and 1 percent of GDP the next year, it can be concluded that:
A)fiscal policy is expansionary.
B)fiscal policy is contractionary.
C)the federal government is borrowing money.
D)the federal government is lending money.

Question

Quizplus · Accepted Answer

A full-employment deficit increasing from zero to 1 percent of GDP indicates that the government is spending more or cutting taxes, which is an expansionary fiscal policy.

If the Full-Employment Deficit as a Percentage of GDP Is