Deck 12: Federal Budgets and Public Policy

Question 1

In 2016,Social Security and Medicare payments accounted for almost _____ of federal outlays.

A)7 percent
B)25 percent
C)15 percent
D)38 percent
E)52 percent

Answer 1

38 percent

Question 2

The President's budget is presented to Congress:

A)in the form of the Economic Report of the President.
B)in a report followed shortly by the Economic Report of the President.
C)at the beginning of the fiscal year.
D)in a report that should be voted up or down within 60 days.
E)in a report that requires a two-thirds vote for ratification.

Answer 2

in a report followed shortly by the Economic Report of the President.

Question 3

Continuing resolutions are:

A)budget agreements that allow agencies,in the absence of an approved budget,to spend at the rate of the previous year's budget.
B) guaranteed benefits for those who qualify for government transfer programs such as
Social Security and Medicare.
C)agreements about total outlays,spending by major category,and expected revenues of the federal government.
D)budget resolutions that allow the federal government to allocate a fixed proportion of yearly outlays toward military related expenditures.
E)legislative actions undertaken to balance the budget.

Answer 3

budget agreements that allow agencies,in the absence of an approved budget,to spend at the rate of the previous year's budget.

Question 4

In the short run,a federal budget deficit will most likely _____.

A)stimulate aggregate supply
B)reduce federal debt
C)boost economic growth
D)reduce national saving
E)boost domestic saving

Question 5

A _____ is a congressional agreement about total outlays,spending by major category,and expected revenues,which guides spending and revenue decisions by the many congressional committees and subcommittees.

A)continuing resolution
B)budget resolution
C)disclaimer vote
D)filibuster
E)stimulus plan

Question 6

Which of the following is true of an increase in the federal government budget surplus?

A)An increase in surplus results in a decrease in the national saving.
B)An increase in surplus shifts the aggregate demand curve rightward.
C)An increase in surplus increases the federal debt.
D)An increase in surplus dampens aggregate demand in the short run.
E)An increase in surplus increases the natural rate of unemployment.

Question 7

The beginning of the formal budget process is signified by:

A)in the form of the Economic Report of the President.
B)in a report followed shortly by the Economic Report of the President.
C)at the beginning of the fiscal year.
D)in a report that should be voted up or down within 60 days.
E)in a report that requires a two-thirds vote for ratification.

Question 8

In 2016,interest payments on the national debt accounted for almost _____ of federal outlays.

A)7 percent
B)25 percent
C)14 percent
D)52 percent
E)40 percent

Question 9

A spike in "All Other Outlays" of the federal government in 2009 was due to:

A)an increase in the financial aid given to Greece earlier that year.
B)an increase in the expenditures on Social Security and Medicare.
C)the fiscal stimulus package passed earlier that year.
D)a sudden increase in military expenditure as a result of the war in Iraq.
E)an increase in the national debt earlier that year.

Question 10

In the short run,a surplus federal budget _____.

A)reduces national saving
B)boosts domestic saving
C)stimulates aggregate demand
D)promotes economic growth in the long run
E)increases the federal debt

Question 11

In 2016,national defense accounted for almost _____ of federal outlays.

A)25 percent
B)15 percent
C)40 percent
D)54 percent
E)60 percent

Question 12

Which of the following categories constitutes the majority of federal outlays in 2016?

A)National defense
B)Interest on the federal debt
C)Social Security,Medicare,and welfare
D)Grants to states and localities
E)Capital expenditures

Question 13

Which of the following is true of the federal budget?

A)The federal budget is a plan that describes a government's monetary policy for the current financial year.
B)The federal budget is a plan that describes a government's fiscal policy for the current financial year.
C)The federal budget is a plan that describes the president's take on the economy.
D)The federal budget is a plan for federal government outlays and revenues for a specified period,usually a year.
E)The federal budget is a plan that describes the eligibility criteria of the major entitlement programs taken up by Congress for the current financial year.

Question 14

The Budget of the United States Government is officially submitted by:

A)the President to Congress and contains spending and revenue proposals for the upcoming fiscal year.
B)Congress to the President and contains spending and revenue proposals for the upcoming fiscal year.
C)the President to Congress and contains proposals for tax revenues.
D)Congress to the President and contains proposals for tax revenues.
E)the President to Congress and is reviewed by the Supreme Court.

Question 15

In 2016,welfare spending accounted for almost _____ of federal outlays.

A)5 percent
B)10 percent
C)14 percent
D)20 percent
E)31 percent

Question 16

The entire U.S.federal budget process,beginning with the delivery of the President's budget to Congress and ending with the beginning of the fiscal year,takes about _____.

A)one month
B)six months
C)nine months
D)one year
E)three months

Question 17

The U.S.government's fiscal year extends from:

A)January to December.
B)April of one year to March of the next year.
C)June of one year to May of the next year.
D)September of one year to August of the next year.
E)October of one year to September of the next year.

Question 18

The budget of an economy is said to be in deficit when:

A)federal outlays exceed revenues.
B)federal revenues exceed outlays.
C)anticipated inflation rate exceeds its actual rate.
D)there is a loss of value of a country's currency with respect to one or more foreign reference currencies.
E)anticipated interest rate exceeds its actual rate.

Question 19

The Economic Report of the President is prepared by:

A)the President.
B)Congress.
C)the Office of Management and Budget.
D)the Council of Economic Advisers.
E)the Secretary of the Treasury.

Question 20

The federal budget is:

A)submitted by Congress to the President and contains proposals for tax increases.
B)submitted by Congress to the President and contains proposals for government expenditures.
C)always in balance,with receipts equal to expenditures.
D)equal to government purchases plus cash and in-kind transfer payments.
E)usually planned for the calendar year,which starts from January.

Question 21

If the government decreased urban welfare payments by a dollar for every dollar increase in farm subsidies,which of the following is the likely net effect?

A)An increase in the budget deficit because government spending has increased
B)A decrease in the budget deficit because transfer payments are not included in the government's budget
C)An increase in the budget deficit because transfer payments have increased
D)An increase in the budget deficit because farm subsidies are transfer payments but urban welfare payments are not
E)No change in the budget deficit

Question 22

A continuing resolution is:

A)an agreement that requires Congress to balance the budget on an annual basis.
B)an agreement that allows Congress to have too much control over the budgetary process.
C)an agreement that allows agencies to spend at the rate of the previous year's budget.
D)a decision made by congressional committee about the federal spending and revenue levels for five years.
E)a guaranteed benefit for those who qualify for government transfer programs.

Question 23

When a budget is not approved in time,_____.

A)agencies operate on the basis of continuing resolutions
B)agencies operate on the basis of a budget resolution developed by budget committees
C)agencies tend to shuts down
D)the President can force Congress to act
E)agencies borrow from the Federal Reserve

Question 24

One way of improving the federal government budget process is to:

A)switch to a two-year or biennial budget.
B)remove the Council of Economic Advisers from the process.
C)detail budgeting by focusing on all groupings and line items.
D)provide for automatic annual increases in all budget categories.
E)eliminate the role of Congressional committees in the process.

Question 25

Drawbacks of the federal government budget process include:

A)the use of continuing resolutions that reward last year's programs without adequate review of performance.
B)Congress having too much control over the budget.
C)a short review period for Congress that results in poor choices in funding programs.
D)Congress having to approve a budget with at least a two-thirds majority vote.
E)the President having too much power to cancel any proposed expenditure without the possibility of a Congressional override.

Question 26

Problems with the federal government budget process include:

A)tough choices to be made by Congress each year on which entitlement programs will receive full support.
B)the constitutional requirement of Congress to balance the budget on an annual basis.
C)an overly detailed budget that allows Congress to reward friends,thereby discouraging restraint on spending.
D)a short review period for Congress that results in poor choices in funding programs.
E)Congress having too much control over the budgetary process.

Question 27

A(n)_____ provides guaranteed benefits for those who qualify under government transfer programs such as Social Security or Medicare.

A)entitlement program
B)excise tax
C)continuing resolution
D)biennial budget
E)employment benefits

Question 28

If the government increased defense spending by $1 million and laid off enough Justice Department employees to decrease the Department of Justice budget by $1 million,which of the following is the likely net effect?

A)An increase in the budget deficit and transfer payments
B)An increase in the budget deficit and net taxes
C)An increase in the budget deficit and government spending
D)No change in the budget deficit because there is no net change in government spending
E)No change in the budget deficit because neither defense spending nor the Department of Justice is included in government spending

Question 29

A possible budget reform involves:

A)a quadrennial budget.
B)breaking down the budget into increasingly small budget lines.
C)appointing agency heads with different priorities than those of elected representatives.
D)to simplify the budget document by concentrating only on major groupings and eliminating line items.
E)to eliminate the operating budget.

Question 30

Which of the following would decrease the size of a federal budget deficit?​

A)A recession
B)An increase in defense spending
C)An increase in the use of automatic stabilizers
D)An increase in taxes
E)An increase in transfer payments

Question 31

Which of the following is not a problem associated with the U.S.federal budget process?

A)The congressional committee framework
B)The lengthy budget process
C)The failure to meet deadlines
D)The lack of detail in the budget
E)Uncontrollable budget items

Question 32

Suppose that government purchases of goods and services increase by $200 and at the same time lump-sum taxes increase by $200.Which of the following is true in this case?

A)Whether the budget deficit will increase or decrease will depend on the value of the marginal propensity to consume.
B)The budget deficit will increase by $200.
C)The budget deficit will increase by $400.
D)The budget deficit will decrease as the economy expands.
E)There will be no change in the budget deficit.

Question 33

Problems with the federal government budget process include:

A)budgeting that allows the President too much discretion in spending decisions.
B)budgeting that increases the flexibility of discretionary fiscal policy.
C)a budget outline that needs to be approved with at least a two-thirds majority vote.
D)most of the expenditures being for entitlement programs.
E)a brief budgeting that does not allow Congress to study whether the budget is an appropriate tool for fiscal policy.

Question 34

If government increased Social Security benefits and decreased the salaries of government workers by the same amount,which of the following is the expected immediate effect?

A)An increase in the budget deficit and government purchases of goods and services.
B)An increase in the budget deficit,but no change in government purchases of goods and services.
C)An increase in the budget deficit and a decrease in government purchases of goods and services.
D)No change in the budget deficit because there has been no change in government purchases of goods and services.
E)No change in the budget deficit because government purchases of goods and services have decreased by the same amount as transfer payments have increased.

Question 35

The problem with a detailed federal government budget is that:

A)monetary policy becomes more difficult to implement.
B)it reduces the flexibility of discretionary fiscal policy.
C)Congress cannot keep it up to date.
D)there is a shortage of congressional committees that deal with the budget.
E)there is a short review period,resulting in poor choices in funding programs.

Question 36

A biennial budget:

A)is more useful than an annual budget as a tool of discretionary fiscal policy.
B)is implemented by the federal government,while an annual budget is implemented by state governments.
C)would ensure that cabinet members spend more time on administering an approved budget and defending a proposed budget.
D)would encourage cabinet members to focus more on running their agencies rather than being involved in budget deliberations.
E)would require shorter-term economic forecasts than an annual budget.

Question 37

Which of the following is true of the federal budget process in the U.S.?

A)Congress must approve a budget with at least a two-thirds majority vote.
B)The federal budget must be balanced each year because the volume of international trade reduces if the government has a surplus or a deficit.
C)Most federal outlays are determined by existing laws.
D)Congress approves a budget that separates the capital budget and the operating budget.
E)Detailed budgeting allows the party in power to reward supporters.

Question 38

If the U.S.government spent $20 million paying people to dig holes in 2005 and then spent $30 million paying the same people to fill the holes up again that same year,we would expect the net effect to be a(n):

A)decrease in transfer payments
B)increase in the budget deficit as transfer payments increased
C)increase in the budget deficit as government purchases of goods and services increased by $50 million
D)increase in the budget deficit as government purchases of goods and services increased by $30 million
E)$10-million-dollar increase in the budget deficit

Question 39

Simplifying the budget document by concentrating only on major groupings and eliminating line items would:

A)ensure that cabinet members spend more time on administering an approved budget and defending a proposed budget.
B)require longer-term economic forecasts that are difficult to obtain.
C)prevent elected officials from including projects they prefer for their personal gains in the budget.
D)increase the flexibility of the discretionary fiscal policy implemented by the federal government.
E)require shorter-term economic forecasts that are easy to obtain.

Question 40

Because deadlines are frequently missed,budgets typically run from year to year based on _____.

A)continuing resolutions
B)budget resolutions
C)congressional suggestions
D)the suggestions of the President
E)the suggestions of the President's Council of Economic Advisers

Question 41

A disadvantage of functional finance is that it:

A)does not focus on producing the potential level of output in an economy.
B)increases the level of unemployment during recessions.
C)allows chronic deficits that magnify into national debt,allowing it to reach an alarming level.
D)requires that the budget is balanced even during times of war.
E)magnifies fluctuations in the business cycle.

Question 42

Which of the following is not a legitimate reason for maintaining federal budget deficits?

A)Deficits boost domestic saving,which in the long run could promote economic growth.
B)Deficits help reduce the size and duration of recessions through automatic stabilizers.
C)Deficits are used to finance capital projects.
D)Public spending through deficit financing wins support from the voters.
E)A federal budget deficit stimulates aggregate demand.

Question 43

Until 1980,the national debt was mostly the result of:

A)wartime borrowing.
B)inflation.
C)bad monetary policy.
D)wasteful Congressional spending.
E)Social Security obligations.

Question 44

The accepted philosophy on U.S.federal deficits prior to the Great Depression was that:

A)the budget should be balanced cyclically.
B)a budget deficit does not matter as long as the economy is at full employment.
C)the budget should be annually balanced.
D)deficits dampen aggregate demand in the short run and reduce the federal debt.
E)spending decreases during expansions and increases during recessions.

Question 45

During a recession,higher welfare outlays:

A)increase the size of the budget deficit even if the government does not undertake discretionary fiscal policy.
B)decrease the size of the budget deficit regardless of the government's discretionary fiscal policy.
C)increase the size of the budget deficit only if the government undertakes discretionary fiscal policy.
D)decrease the size of the budget deficit only if the government undertakes discretionary fiscal policy.
E)have the same effect on the budget deficit as they do in times of expansion.

Question 46

A major problem with the implementation of an annually balanced budget is that it:

A)allows the national debt to burgeon with chronic deficits.
B)relies upon government officials to budget for surpluses during economic booms in order to cover deficits during recessions.
C)requires annual revenues to match with outlays even during times of war,when there is a sudden increase in military expenditures.
D)magnifies the fluctuations in the business cycle.
E)dampens swings in the business cycle.

Question 47

A budget philosophy using fiscal policy to achieve the economy's potential GDP,rather than balancing budgets either annually or over the business cycle,is termed:

A)budget finance.
B)functional finance.
C)crowding out.
D)crowding in.
E)deficit finance.

Question 48

Which of the following correctly describes the trend in the federal budget during the 1980s?

A)Federal spending declined relative to GDP,while federal revenues rose relative to GDP.
B)Federal spending rose relative to GDP,while federal revenues declined relative to GDP.
C)Balanced budgets were passed through cooperation between the President and Congress.
D)The dollar depreciated,thereby lowering the deficit.
E)The budget deficit decreased and then disappeared,turning into a surplus in the 1980s.

Question 49

A disadvantage of having an annually balanced budget is that government spending would have to:

A)allow the national debt to burgeon with chronic deficits.
B)decline during a recession to offset the increase in tax revenues.
C)rise during a recession to match the increase in tax revenues.
D)rise during an expansion to offset the decline in tax revenues.
E)decline in a recession to match the decrease in tax revenues.

Question 50

If a government runs a cyclically balanced budget,its revenue will equal its expenditure:

A)each year.
B)at each phase of the business cycle.
C)over the course of the business cycle.
D)only during expansions.
E)only during recessions.

Question 51

Which of the following statements about the tax cut enacted in 1981 is correct?

A)The tax cut caused the recession of 1982.
B)The tax cut and the recession of 1982 combined to produce one of the largest peace-time deficits ever experienced up to that time.
C)The tax cut stimulated a large increase in economic activity and led directly to the balanced budget of 1982.
D)The tax cut was opposed by supply-side economists.
E)The tax cut was favored by Congress but opposed by the President and passed over his veto.

Question 52

Because of automatic stabilizers,_____.

A)fiscal policy focuses on maintaining an annually balanced budget
B)planning discretionary fiscal measures to reduce economic fluctuations is easy
C)government budget deficits are zero if averaged out over the entire business cycle
D)policy makers should be concerned less with balancing the budget annually
E)government budget deficits are smaller during expansions and larger during contractions

Question 53

According to the budget philosophy of functional finance,_____.

A)the budget should be balanced annually
B)surpluses should be run during periods of prosperity and deficits should be run during recessions
C)the government budget should be whatever is necessary to have the economy operate at potential GDP
D)the budget should never be in balance
E)the rate of growth in the national debt should equal the rate of growth in the money supply

Question 54

A(n)_____ is a budget philosophy that was followed prior to the Great Depression that aimed at matching annual revenues with outlays,except during war time.

A)annually balanced budget
B)annual surplus budget
C)biennial deficit budget
D)biennially balanced budget
E)cyclically balanced budget

Question 55

In the United States,since the Great Depression,the federal government has:

A)run budget deficits only in periods of recession.
B)run a budget deficit in almost every year.
C)practiced a policy of annually balancing the budget.
D)run budget deficits only in wartime.
E)run a surplus in most years.

Question 56

When budget deficits during recessions are covered by budget surpluses during expansions,it is called:

A)an annually balanced budget.
B)a cyclically balanced budget.
C)crowding out.
D)crowding in.
E)a biennial balanced budget.

Question 57

Which of the following is true of an annually balanced federal budget?

A)Most economists agree that the federal government should balance its budget just as each household does.
B)Such a policy would require the government to increase its spending when tax receipts decrease.
C)Such a policy became popular between the 1930s and 1960s.
D)Such a policy guarantees that the economy is its potential level.
E)Such a policy could worsen a contractionary gap.

Question 58

The federal budget deficit becomes _____ during recessions because _____.

A)smaller;transfer payments increase and tax revenues decline
B)larger;transfer payments increase and tax revenues decline
C)larger;both transfer payments and tax revenues increase
D)smaller;both transfer payments and tax revenues increase
E)smaller;both transfer payments and tax revenues decrease

Question 59

According to Keynes' philosophy of government budgets,_____.

A)chronic deficits accumulate into a national debt
B)permanent surpluses are desirable
C)fiscal policy focuses on maintaining an annually balanced budget
D)deficits dampen aggregate demand in the short run and reduce the federal debt
E)deficits are appropriate during recessions

Question 60

An annually balanced budget:

A)is the surest path to economic stability.
B)is required by the U.S.Constitution.
C)dampens cyclical swings by decreasing government spending during expansions and increasing it during recessions.
D)accentuates cyclical swings by increasing government spending during expansions and reducing it during recessions.
E)is a goal that has only been achieved twice in the past 5 years.

Question 61

Federal deficits amounted to 3.5 percent of the U.S.GDP by 2003 because of:

A)the global financial crisis of 2002 that increased the rate of unemployment.
B)an increase in the cost of fighting the war against terrorism.
C)an improving stock market that decreased interest payment burdens for the government.
D)a decrease in military and defense spending due to the end of the war in Iraq.
E)an increase in welfare spending and Medicare expenses.

Question 62

Which of the following statements is true?

A)Federal budget deficits became progressively smaller during the 1990s and turned into a surplus by 1998.
B)Federal spending declined relative to GDP,while federal revenues rose relative to GDP during the 1980s.
C)Functional finance says that policy makers should be concerned less with the economy's potential output and more with balancing the budget annually.
D)A disadvantage of functional finance is that it increases the level of unemployment during recessions.
E)A disadvantage of annual financed budget is that it dampens swings in the business cycle without increasing the national debt.

Question 63

If an increase in the federal deficit stimulates an economy,_____.

A)an expansionary gap exists in the economy
B)the crowding in of private investment takes place
C)the crowding out of private investment offsets crowding in of private investment
D)the crowding out and crowding in of private investment cancels each other out
E)interest rates increase significantly

Question 64

The crowding in of private investment is associated with:

A)a leftward shift of the aggregate demand curve for an economy.
B)a leftward shift of the aggregate supply curve of an economy.
C)a reduction in the level of government spending.
D)a reduction in corporate income taxes.
E)an increase in aggregate demand induced by increased government borrowing.

Question 65

If aggregate output is falling,_____.

A)federal budget deficit decreases
B)tax revenue increases
C)automatic stabilizers will tend to increase the size of the deficit
D)automatic stabilizers will tend to decrease the size of the deficit
E)transfer payments decrease as fewer people become eligible for public assistance

Question 66

In 1981,U.S.policy makers predicted a balanced budget as:

A)the budget included a decrease in defense expenditures.
B)the budget included an increase in the tax rate.
C)the budget included an increase in unspecified government spending.
D)the growth in GDP was expected to be large enough to lead to an increase in tax revenues despite the tax cut.
E)the growth in GDP was expected to be small enough to require less government spending.

Question 67

If the deficit is increasing because of the effects of automatic stabilizers,_____.

A)the budget is annual balanced
B)the economy is contracting
C)the annual deficit will approach zero
D)the budget is cyclically balanced
E)the economy is growing

Question 68

Other things remaining constant,higher trade deficits in the U.S.will lead to:

A)U.S citizens buying greater foreign securities.
B)an increase in domestic savings in the U.S.
C)a decrease in the demand for U.S.dollars.
D)an increase in funds from abroad.
E)an increase in the standard of living of the U.S residents.

Question 69

If a federal budget deficit causes crowding out,_____.

A)real GDP does not increase by as much as the government purchases of goods and services multiplier would predict because the marginal propensity to consume decreases
B)real GDP does not increase by as much as the government purchases of goods and services multiplier would predict because investment decreases
C)interest rates fall,reducing the burden of the debt
D)firms become more willing to invest
E)interest rates fall,so that decreases in investment and government purchases of goods and services exactly offset the expansionary effect of the deficit

Question 70

Discretionary expansionary fiscal policy may not lead to _____.

A)decreased national saving
B)decreased unemployment
C)inflation
D)lower interest rates
E)crowding out

Question 71

As a result of the increased deficit associated with discretionary fiscal policy,_____.

A)both the interest rate and real output fall
B)both the interest rate and nominal output rise
C)the interest rate falls and real output rises
D)the interest rate rises and real output falls
E)nominal output rises,real output falls,and the interest rate rises

Question 72

Deficits that arise from discretionary fiscal policy lead to:

A)increased private demand for money,which is offset by the sale of more government securities.
B)decreased private demand for money,which is offset by the sale of more government securities and higher interest rates
C)increases in the number of government securities sold to the public and higher interest rates.
D)decreases in the number of government securities sold to the public and higher interest rates.
E)increases in the public's demand for money and increases in the number of government securities sold to the public,leading to lower interest rates.

Question 73

Crowding out occurs by:

A)causing reduced government purchases of goods and services.
B)reducing the value of the multiplier used for government purchases of goods and services by increasing the interest rate.
C)reducing the value of the multiplier used for government purchases of goods and services by increasing the marginal propensity to consume.
D)reducing the value of the multiplier used for government purchases of goods and services by decreasing the marginal propensity to consume.
E)causing reduced imports of goods and services.

Question 74

Which of the following is not a form of crowding out?

A)Lower household spending due to higher interest rates
B)Lower business spending due to higher interest rates
C)Lower net exports due to higher interest rates
D)Lower private spending due to higher taxes
E)Greater output and employment in the short run

Question 75

​Crowding out refers to the government's increased demand for credit,which:

A)displaces some private sector consumption by decreasing the price level.
B)displaces some private sector borrowing by decreasing the interest rate.
C)displaces some private sector borrowing by increasing the interest rate.
D)hires labor away from the private sector.
E)displaces some import purchases by the private sector.

Question 76

Discretionary policy deficits are associated with:

A)increases in national saving.
B)higher prices.
C)lower outputs.
D)lower interest rates.
E)raising taxes.

Question 77

Actual federal budgets are not an accurate measure of discretionary fiscal policy because:

A)it is difficult to measure government spending accurately.
B)people cheat on their income taxes.
C)budget deficits increase during expansions even without changes in fiscal policy.
D)budget deficits increase during recessions even without changes in fiscal policy.
E)earlier administrations may have contributed to current budget deficits.

Question 78

Which of the following components of aggregate expenditure is most subject to crowding out?

A)Consumption expenditures
B)Investment spending
C)Imports
D)Government purchases of goods and services
E)National saving

Question 79

A possible explanation for the persistence of the U.S.federal budget deficits is that:

A)it is easier politically to increase government spending than to decrease taxes.
B)it is easier politically to decrease government spending than to decrease taxes.
C)it is easier politically to increase government spending than to increase taxes.
D)the economy naturally tends toward recessions.
E)the economy naturally tends toward full employment.

Question 80

The crowding in of private investment is more likely to occur,when _____.

A)there is a depreciation of domestic currency
B)interest rates increase significantly
C)a contractionary gap exists in an economy
D)the deficits lower expectations about economic growth
E)an expansionary gap exists in an economy