An increase in the structural deficit most likely reflects the fact that fiscal policy is

Question

Quizplus · Accepted Answer

An increase in the structural deficit means that government spending is increasing faster than revenue, which is indicative of expansionary fiscal policy. This can lead to a larger gap between potential and full-employment GDP, and potentially a higher national debt. Option A is incorrect as an increase in the structural deficit means that fiscal policy is having more impact on the economy. Option B is incorrect as an increase in the structural deficit means that the national debt is likely to increase. Option D is correct, but not specific enough to fully answer the question. Option E is incorrect as an increase in the structural deficit is unlikely to cause the price level to fall.

An Increase in the Structural Deficit Most Likely Reflects the Fact