The diagram below shows two budget deficit functions for a hypothetical economy.
FIGURE 31-2
-Refer to Figure 31-2.Initially,suppose the economy is at point A on budget deficit function
.Real GDP (Y) is $100 million.If the government implements a fiscal policy that causes the budget deficit function to shift to
,we can conclude that the policy was ________ and the structural deficit will be ________ than previously.
A) expansionary; smaller
B) expansionary; larger
C) contractionary; larger
D) contractionary; smaller
Correct Answer:
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