An increase in federal budget deficit
A)only occurs when there is a surplus in the balance of trade
B)may create inflation
C)decreases aggregate supply
D)decreases aggregate quantity demanded along a stationary curve
E)may reduce the equilibrium level of output and employment

Question

Quizplus · Accepted Answer

An increase in the federal budget deficit can lead to higher demand for goods and services, potentially causing inflation if the economy is near full capacity.

An Increase in Federal Budget Deficit