Suppose the economy is in an equilibrium in which real GDP is less than potential GDP. To increase real GDP, the government can use a fiscal stimulus of
A) decreasing government expenditure only.
B) decreasing government expenditure and simultaneously increasing taxes.
C) decreasing taxes and/or increasing government expenditure.
D) increasing the quantity of money.
E) increasing taxes only.
Correct Answer:
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Q123: Q124: Need-based spending -------------------- during an expansion and-------------------- Q125: Taxes that change with the level of Q126: A $100 million decrease in government expenditure Q127: If a tax cut increases people's labor Q128: When an economy faces an inflationary gap, Q129: If we look at the federal government Q130: If the nominal interest rate is 10 Q131: Ignoring any supply-side effects, if government expenditure Q132: The crowding out effect refers to the--------------------from--------------------in
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