Figure 11-1

In Figure 11-1, to achieve equilibrium at potential GDP, the government could

Question

Figure 11-1

In Figure 11-1, to achieve equilibrium at potential GDP, the government could

Quizplus · Accepted Answer

To achieve equilibrium at potential GDP, the government would need to increase aggregate demand. This can be done by increasing government purchases, as it directly increases the level of aggregate demand in the economy. Increasing taxes or decreasing transfer payments would have the opposite effect, decreasing aggregate demand and potentially pushing the economy even further from equilibrium.

Figure 11-1 in Figure 11-1, to Achieve Equilibrium at Potential GDP, the Potential