Which of the following is true of an increase in the federal government budget surplus?
A) An increase in surplus results in a decrease in national saving.
B) An increase in surplus shifts the aggregate demand curve rightward.
C) An increase in surplus increases the federal debt.
D) An increase in surplus dampens aggregate demand in the short run.
E) An increase in surplus increases the natural rate of unemployment.

Question

Quizplus · Accepted Answer

An increase in federal government budget surplus means that the government is collecting more revenue than it is spending. This reduces the amount of money in circulation, which leads to a decrease in aggregate demand. As a result, in the short run, an increase in surplus dampens aggregate demand.

Which of the Following Is True of an Increase in the Federal