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.
The answer is E. If the federal budget deficit has increased, then government spending must ...
This solution identifies one effect of an increase in the federal budget deficit and provides a detailed explanation.