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One Effect of an Increase in the Federal Budget Deficit

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An increase in the federal budget deficit:

A only occurs when there is a deficit in the balance fo trade.
B creates deflation
C decreases aggregate demand.
D decreases aggregate quanity demanded along a stationary aggreate curve.
E rases the equilbrium level of output and employment.

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Solution Summary

This solution identifies one effect of an increase in the federal budget deficit and provides a detailed explanation.

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The answer is E. If the federal budget deficit has increased, then government spending must ...

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