Table 27-2

-Refer to Table 27-2. Consider the hypothetical information in the table above for potential real GDP, real GDP, and the price level in 2018 and in 2019 if Congress and the president do not use fiscal policy. If Congress and the president want to keep real GDP at its potential level in 2019, they should
A) buy Treasury securities.
B) conduct expansionary fiscal policy.
C) decrease government purchases.
D) decrease the discount rate.

Question

Table 27-2
 
-Refer to Table 27-2. Consider the hypothetical information in the table above for potential real GDP, real GDP, and the price level in 2018 and in 2019 if Congress and the president do not use fiscal policy. If Congress and the president want to keep real GDP at its potential level in 2019, they should
A) buy Treasury securities. 
B) conduct expansionary fiscal policy. 
C) decrease government purchases. 
D) decrease the discount rate.

Quizplus · Accepted Answer

To keep real GDP at its potential level, Congress and the president should decrease government purchases to reduce aggregate demand, assuming real GDP is above potential GDP.

Table 27-2 -Refer to Table 27-2. Consider the Hypothetical Information in the Hypothetical