The figure on the right shows a pair of budget deficit functionsfor a country. (G+iD - T)o denotes the initial budget deficitfunction. Assume that Y₁ is the potential output but theeconomy is currently at Y₂. A more expansionary fiscal policythat moves the economy to Y₁ would result in a structuraldeficit increase measured byA. the change from 0 to D1.B. the change from 0 to D2.C. the change from 0 to D3.D. the change from D1 to D2.E. the change from D1 to D3.(...)00-00-00-00-00+00-D2D100-00+The Budget Deficit Function300Y₂ Y₁5009001200(G+iD-T)₁(G+iD-ToReal GDP (in billions of dollars)QQ

A budget deficit occurs when a government's expenditures exceed its revenues in a given period.…

Answered: ge from 0 to D1. ge from 0 to D2. me…

Business

Economics

ge from 0 to D1. ge from 0 to D2. me from 0 to D3

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter18: Six Debates Over Macroeconomic Policy

Section18.5: Should The Government Balance Its Budget?

Problem 5QQ

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Question

The figure on the right shows a pair of budget deficit functions
for a country. (G+iD - T)o denotes the initial budget deficit
function. Assume that Y₁ is the potential output but the
economy is currently at Y₂. A more expansionary fiscal policy
that moves the economy to Y₁ would result in a structural
deficit increase measured by
A. the change from 0 to D1.
B. the change from 0 to D2.
C. the change from 0 to D3.
D. the change from D1 to D2.
E. the change from D1 to D3.
(...)
00-
00-
00-
00-
00+
00-
D2
D1
00-
00+
The Budget Deficit Function
300
Y₂ Y₁
500
900
1200
(G+iD-T)₁
(G+iD-To
Real GDP (in billions of dollars)
Q
Q

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