Table 27-3

-Refer to Table 27-3. 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 use fiscal policy successfully to keep real GDP at its potential level in 2019, which of the following will be higher than if Congress and the president had taken no action?
A) real GDP and the unemployment rate
B) real GDP and the inflation rate
C) real GDP and potential GDP
D) potential GDP and the inflation rate

Question

Table 27-3
 
-Refer to Table 27-3. 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 use fiscal policy successfully to keep real GDP at its potential level in 2019, which of the following will be higher than if Congress and the president had taken no action?
A) real GDP and the unemployment rate 
B) real GDP and the inflation rate 
C) real GDP and potential GDP 
D) potential GDP and the inflation rate

Quizplus · Accepted Answer

If fiscal policy is used successfully to keep real GDP at its potential level, the inflation rate will be higher than if no action was taken, as the economy is prevented from operating below potential, which would have kept inflation lower.

Table 27-3 -Refer to Table 27-3. Consider the Hypothetical Information in the Hypothetical