Explain why a rise in the actual budget deficit does not necessarily reflect a change in fiscal policy. A. A rise in the actual budget deficit could also be caused by a decrease in real GDP. B. A rise in the actual budget deficit could also be caused by an increase in government expenditure. C. A rise in the actual budget deficit could also be caused by a reduction in tax rates. D. A rise in the actual budget deficit could also be caused by an increase in real GDP.
Added by Cameron L.
Step 1
Step 1: A rise in the actual budget deficit could also be caused by an increase in government expenditure. Show more…
Show all steps
Your feedback will help us improve your experience
Alejandro Ruiz and 80 other Microeconomics educators are ready to help you.
Ask a new question
Labs
Want to see this concept in action?
Explore this concept interactively to see how it behaves as you change inputs.
Key Concepts
Recommended Videos
An economy is in a recession with a large recessionary gap and a government budget deficit. a. Is the government budget deficit a structural deficit or a cyclical deficit? Explain. b. Explain how automatic fiscal policy is changing the output gap. c. If the government increases its discretionary expenditure, explain how the structural deficit might change.
For various reasons, fiscal policy changes automatically when output and employment fluctuate. a. Explain why tax revenue changes when the economy goes into a recession. b. Explain why government spending changes when the economy goes into a recession. c. If the government was to operate under a strict balanced-budget rule, what would it have to do in a recession? Would that make the recession more or less severe?
A common confusion is that between the debt and the deficit. Explain each of the following: a. A budget deficit leads to a growing government debt. b. Reducing the deficit does not reduce the government debt. c. Reducing the government debt requires running a budget surplus. d. Even though the government deficit was reduced in the 1993–1998 period, the government debt still rose in these years.
Recommended Textbooks
Principles of Economics
Principles of Microeconomics for AP® Courses
Economics
Transcript
Watch the video solution with this free unlock.
EMAIL
PASSWORD