An increase in the federal budget deficit _____
A) only occurs when there is a deficit in the balance of trade.
B) creates deflation.
C) decreases aggregate demand.
D) decreases the aggregate quantity demanded along a stationary aggregate demand curve.
E) increases aggregate demand.

Question

Quizplus · Accepted Answer

An increase in the federal budget deficit means that the government is spending more than it is taking in through taxes. This increase in government spending will increase the overall demand for goods and services in the economy, leading to an increase in aggregate demand.

An Increase in the Federal Budget Deficit _____