On page 318 of the study guide volume 2, there is a question that asks which statement is most accurate. I will include only the two choices in question.
Choice A says an increase in budget deficit is always expansionary.
Choice B says an increase in government spending is always expansionary.
I picked B but the solution says it is A. It further says note that increases in government spending may be accompanied by an even bigger rise in tax receipts and hence may not be expansionary.
On page 316 it clearly said govt deficit may NOT be a good indicator of policy stance. How can A be correct?
Can someone please explain?