Suppose the Economy Is Initially Experiencing a Short-Run Recessionary Gap

Multiple Choice

Suppose the economy is initially experiencing a short-run recessionary gap. An increase in the size of the budget deficit will

A) increase the size of the recessionary gap.
B) reduce the size of the recessionary gap.
C) lead to an increase in prices with no increase in real GDP.
D) lead to a decrease in prices with an increase in real GDP.