The economy starts out with a balanced Federal budget. If the government then implements expansionary fiscal policy, then there will be a:

Question

Quizplus · Accepted Answer

Expansionary fiscal policy involves increasing government spending and/or decreasing taxes, both of which would lead to a decrease in government revenue and an increase in government spending. This would result in a budget deficit, as the government is spending more money than it is bringing in. It would not necessarily impact the trade balance, as that is more affected by international trade policies and factors.

The Economy Starts Out with a Balanced Federal Budget