An increase in the federal budget deficit:

A) only occurs when there is a deficit in the balance of trade.
B) creates deflation.
C) decreases aggregate demand.
D) decreases the aggregate quantity demanded along a stationary aggregate demand curve.
E) raises the equilibrium level of output and employment.

Federal Budget Deficit

The financial shortfall when a government's expenditures exceed its revenues within a given fiscal year.

Aggregate Demand

The total demand for goods and services within an economy at a given overall price level and in a given time period.

Equilibrium Level

Equilibrium level refers to the state in an economy or market where supply equals demand, so there is no tendency for change.