Suppose Country A initially operates at the full-employment equilibrium and the fiscal budget of the government is balanced. In the short run, an economic recovery of Country A’s trading partners will result in __________ and __________ of Country A.
A. an inflationary (output) gap ….. a fiscal surplus
B. an inflationary (output) gap ….. a fiscal deficit
C. a deflationary (output) gap ….. a fiscal surplus
D. a deflationary (output) gap ….. a fiscal deficit