If the Government Decreased Urban Welfare Payments by a Dollar

Multiple Choice

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