The government of Youland increased its spending by 100 billion. ...

[erika]

The government of Youland increased its spending by 100 billion. However, the corresponding change in output was much smaller than that predicted by the government expenditure multiplier. This occurs due to ________.
 
  A) crowding out B) a liquidity crisis
  C) the internalization of an externality D) quantitative easing

Question 2

Refer to the above figure. A budget deficit occurs when real national income is
 
  A) Y3.
  B) Y1.
  C) Y2.
  D) None of the above: cannot be determined given the information.

[jaymee143]

Answer to Question 1

A

Answer to Question 2

B