If real GDP equals C in the diagram below,
A)distance df represents a budget surplus.
B)distance de represents a budget surplus.
C)there is a structural surplus.
D)there is a structural deficit.
E)distance de represents a cyclical surplus.

Question

If real GDP equals C in the diagram below, 
A)distance df represents a budget surplus. 
B)distance de represents a budget surplus. 
C)there is a structural surplus. 
D)there is a structural deficit. 
E)distance de represents a cyclical surplus.

Quizplus · Accepted Answer

Distance DE represents a budget surplus, indicating that the government's revenues (represented by the distance between the vertical line at real GDP level and the 45-degree line) are greater than its expenditures (represented by the distance between the vertical line and the aggregate expenditure line). This implies that the government is running a budget surplus, which could be due to various reasons such as higher taxes, lower spending, or stronger economic growth. There is no information in the diagram to determine whether this surplus is structural or cyclical.

If Real GDP Equals C in the Diagram Below