Did the shift of the federal budget from deficit to surplus during the 1990s weaken aggregate...
Did the shift of the federal budget from deficit to surplus during the 1990s weaken aggregate demand? (Choose which apply).
A) It occurred without weakening either aggregate demand or the growth of the economy.
(B) It weakened aggregate demand, but did not slow down the growth of the economy.
(C) It occurred without weakening aggregate demand, but did slow down the growth of the economy.
(D) It weakened both aggregate demand and the growth of the economy.
Homework Answers
Correct answer: (D)
Reason: With the budget going from deficit to surplus, aggregate demand in the economy fell and the economy experienced a fall in the real GDP and thus economic growth.
This occured because the country experienced contractionary monetary policies to curb inflation, which led to reduced AD and economic growth.
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Did the shift of the federal budget from deficit to surplus
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