An economy has real GDP of $300 billion and potential GDP of $240 billion. To move the economy to potential GDP, the government should__________ taxes and/or __________government expenditure.

Question

Quizplus · Accepted Answer

The economy is below potential GDP, so the government should increase government expenditure and/or decrease taxes to stimulate aggregate demand and move the economy to potential GDP.

An Economy Has Real GDP of $300 Billion and Potential