In Year 1, the actual budget deficit was $150 billion and the cyclically-adjusted deficit was $125 billion. In Year 2, the actual budget deficit was $130 billion and the cyclically-adjusted deficit was $125 billion. It can be concluded that from Year 1 to Year 2:

Suppose a bond sells for $2,000 and pays $200 per year in interest. What will happen to the current interest rate if the price of the bond changes to $1,800?

a. It decreases by 10 percentage points. b. It increases by 10 percentage points. c. It remains unchanged. d. It increases by 1 percentage point. e. It decreases by 1 percentage point.

Starting from long-run equilibrium, a large decrease in government purchases will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.

A. expansionary; lower; potential B. expansionary; higher; potential C. recessionary; lower; potential D. recessionary; lower; lower