Which of the following is true of an increase in a federal government budget surplus?
A)When the surplus increases,revenues rise less than expenditures.
B)The aggregate demand curve shifts rightward as a result of an increasing surplus.
C)The unemployment rate falls as a result of an increasing surplus.
D)Such an increase in the surplus might close an expansionary gap.
E)The natural rate of unemployment increases as a result of an increasing surplus.

Question

Quizplus · Accepted Answer

An increase in a federal government budget surplus might close an expansionary gap. When the government runs a budget surplus, it means that it is taking in more revenue than it is spending. This can lead to a reduction in the supply of money in the economy, which can help to reduce inflationary pressures and close an expansionary gap. It is important to note, however, that a budget surplus might also lead to other economic consequences, such as a reduction in aggregate demand and potential unemployment.

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