The Government Decides to Increase Its Expenditures by $250

Multiple Choice

The government decides to increase its expenditures by $250. The multiplier in this economy is 4 and the tax rate is 22 percent. The net effect of this expansionary fiscal policy is to:

A) increase the budget deficit by $30.
B) increase the budget deficit by $220.
C) decrease the budget deficit by $30.
D) decrease the budget deficit by $220.