deficit & fiscal policy

Changes in the size of the federal deficit or surplus are often used to gauge whether fiscal policy is adding additional demand stimulas or imposing additional demand restraint. If we’ve noticed recently that the federal budget is shifting toward a deficit, we can conclude: A. An expansionary fiscal policy is being implemented. B. A restrictive fiscal policy is being implemented. C. An expansionary monetary policy is being implemented. D. We can conclude nothing about discretionary fiscal policy

A. An expansionary fiscal policy is being implemented.


A, they are using more money to stimulate the economy

A: deficits are created during recessions (unemployment benefits and less taxes received); therefore, an expansion is being implemented.

A…however this can also push the goverment in the “crowding out effect”

Sorry u r all tricked … (so was I)

So the key word is “shifting” which would mean B: restrictive is being implemented!

I think he means D, but not really convinced.

Yeah, the only other answer that I though can make sense is D. Depends how you interpret the question I guess…

Changes in the siz e of the deficit m ay aris e from two different s ources . They may refelect the state of the economy: during a recession the budget will shift to a deficit one even if there is no change in fiscal policy. They may reflect discretionary fiscal policy (expansionary or restrictive). D.

Where are these questions coming from? None seem to be real concise to what they are trying to ask.

stalla 2007