If the full-employment surplus as a percentage of GDP is zero in one year, and 2 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 surplus increasing from zero to 2 percent of GDP indicates that the government is collecting more in taxes or spending less relative to GDP, which is a sign of contractionary fiscal policy.

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