1. Which of the following statements is NOT correct?

A) Deficit spending increases the debt.
B) Debt is the total amount owed.
C) Deficit is when G > T in a year.
D) Deficits are larger than the debt.
E) An increase in government spending increases AD.

2. Fiscal policy can be used to close a(n) ________ by _________ government spending.

A) inflationary gap; decreasing
B) output gap; decreasing
C) recessionary gap; decreasing
D) beyond full employment; increasing
E) contractionary gap; decreasing

3. Which answer below correctly describes the correct fiscal policy and its effects to correct a recessionary gap?

A) G (down); AD (decrease); PL (down); RGDP (down); Y (down); Employment (down); Unemployment (up)
B) G (up); AD (increase); PL (down); RGDP (down); Y (down); Employment (up); Unemployment (up)
C) G (up); AD (increase); PL (up); RGDP (up); Y (up); Employment (up); Unemployment (down)
D) G (down); AD (decrease); PL (down); RGDP (down); Y (down); Employment (up); Unemployment (down)
E) G (down); AD (decrease); PL (down); RGDP (up); Y (up); Employment (up); Unemployment (down)