Author Question: Suppose that the federal budget is balanced when GDP is at potential GDP. If equilibrium GDP falls ... (Read 41 times)

lbcchick · **on:** Jun 29, 2018

Suppose that the federal budget is balanced when GDP is at potential GDP. If equilibrium GDP falls below potential

A) government transfer payments will be rising and tax receipts will be falling.
B) this will result in a current budget deficit.
C) the cyclically adjusted budget will be balanced.
D) All of the above are correct.

Question 2

An increase in the government budget deficit will not lead to a current account deficit if domestic investment declines.

Indicate whether the statement is true or false