Question : 41) Consider the government’s budget deficit function over Years 1 : 1384505

41) Consider the government’s budget deficit function over Years 1 and 2. Suppose that in Year 2 there was a lower federal budget deficit than in Year 1. This could be explained by ________ in Year 2.

A) higher government expenditures (with constant real GDP)

B) higher real GDP (with constant fiscal policy)

C) lower real GDP (with constant fiscal policy)

D) a higher stock of government debt

E) an upward shift of the budget deficit function

42) Consider the government’s budget deficit function. Other things being equal, an autonomous increase in government purchases causes ________ the budget deficit function.

A) an upward movement along

B) a downward movement along

C) an upward shift of

D) a downward shift of

E) no change in

43) Consider the government’s budget deficit function, graphed with the budget deficit on the vertical axis and real GDP on the horizontal axis. The vertical position (or height) of the budget deficit function is determined by

A) the government’s fiscal policies.

B) nominal GDP.

C) the interest rate times taxes.

D) the purchase and sale of government securities on the open market.

E) the stock of government debt minus government spending.

44) Consider the government’s budget deficit function, graphed with dollars on the vertical axis and real GDP on the horizontal axis. This function is downward sloping because as real GDP

A) falls, the budget deficit function shifts down.

B) falls, tax revenues rise, decreasing the deficit or increasing the surplus.

C) rises, tax revenues rise, decreasing the deficit or increasing the surplus.

D) rises, tax revenues fall, decreasing the deficit or increasing the surplus.

E) rises, it leads to increasing debt-service payments.

45) If the economy goes into a recession, a government budget deficit is most likely to

A) increase, because government expenditures and tax revenues will both rise.

B) increase, because government expenditures will rise and tax revenues will decline.

C) remain unchanged, although there will be a primary budget surplus.

D) remain unchanged, because changes in government expenditures and tax revenues will balance each other out.

E) decrease, because government expenditures will decrease and tax revenues will rise.

46) Suppose the government’s budget deficit falls from one year to the next, but there has been no change in the government’s fiscal policy. The change in the budget deficit can be explained by

A) a rising real interest rate.

B) a change in the stance of fiscal policy.

C) a rising real GDP.

D) a rise in the cyclically adjusted deficit.

E) a rise in the primary budget deficit.

47) Refer to Figure 32-1. Initially, suppose that real GDP is $100 million and the budget deficit is $4 million, as shown by point A on the graph. Which of the following is consistent with a move from point A to point B?

A) implementation of an expansionary fiscal policy

B) implementation of a contractionary fiscal policy

C) implementation of a contractionary monetary policy

D) the economy entering into a recession

E) the economy entering into a boom

48) Refer to Figure 32-1. Initially, suppose that real GDP is $100 million and the budget deficit is $4 million, as shown by point A. If the government implements an expansionary fiscal policy by decreasing lump-sum taxes, then

A) the budget deficit function would shift up.

B) the budget deficit function would shift down.

C) the budget deficit function would become steeper.

D) the budget deficit function would become flatter.

E) the size of the budget deficit would decrease as we move from point A to point B.

49) Refer to Figure 32-1. Initially, suppose that real GDP is $100 million and the budget deficit is $4 million, as shown by point A. If the government implements an expansionary fiscal policy by increasing its purchases of goods and services, then

A) the budget deficit function would shift down.

B) the budget deficit function would become steeper.

C) the budget deficit function would become flatter.

D) the budget deficit function would shift up.

E) the size of the budget deficit would decrease as we move from point A to point B.

50) Refer to Figure 32-1. Initially, suppose that real GDP is $100 million and the budget deficit is $4 million, as shown by point A. If the government implements a contractionary fiscal policy by decreasing its purchases of goods and services, then

A) the budget deficit function would shift up.

B) the budget deficit function would shift down.

C) the budget deficit function would become steeper.

D) the budget deficit function would become flatter.

E) the size of the budget deficit would decrease as we move from point A to point B.