If There Is Initially a Federal Budget Surplus, and Government

If there is initially a federal budget surplus, and government purchases and transfer payments both fall:

A) there is an indeterminate effect on both AD and the budget surplus.
B) AD increases and the budget surplus increases.
C) AD increases and the budget surplus decreases.
D) AD decreases and the budget surplus increases.
E) AD decreases and the budget surplus decreases.

Correct Answer:

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