Order the answer to: The economy is in a…
|Question||The economy is in a recession, the recessionary gap is large, and there is a budget deficit.
a. Do we know whether the budget deficit is structural or cyclical? Explain your answer.
b. Do we know whether automatic fiscal policy is increasing or decreasing the output gap? Explain your answer.
c. If a discretionary increase in government expenditure occurs, what happens to the structural deficit or surplus? Explain.
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