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Excess & Deficient Demand · Question 40 of 53

Question 40

MediumOriginal question

Read the two statements and choose the correct option.

I. A budget surplus is a suitable remedy for deficient demand.

II. Borrowing to spend more on public works is a remedy for deficient demand.

Options for question 40

Show the answer and explanation
CorrectNot quiteAnswer B

Correct answer: B

Explanation

  1. A surplus takes more in taxes than it spends, which lowers AD. I is false.

  2. Deficit-financed spending adds to AD. II is true.

Concept
Budget stance in a slump
Typical time
70 s
Your time
—
The rule this testsFiscal measures
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