If the economy has been producing at a point where real GDP is less than potential GDP, what fiscal policy can the federal government use to restore real GDP to potential GDP?

Question

Quizplus · Accepted Answer

Cutting taxes would result in increased disposable income for consumers, which would lead to an increase in consumption spending and aggregate demand. This would shift the aggregate demand curve to the right, leading to an increase in real GDP.

If the Economy Has Been Producing at a Point Where