20.3 Chapter Figures

The figure above shows a nation's aggregate demand curve, aggregate supply curve, and potential GDP.
-In the figure above, to use fiscal policy to move the economy back to potential GDP, the government must increase government expenditure by ________ $1 trillion and/or decrease taxes by ________ $1 trillion.
A)recessionary; exactly; exactly
B)inflationary; less than; less than
C)recessionary; less than; more than
D)recessionary; less than; less than
E)recessionary; more than; more than

Question

20.3 Chapter Figures
  
The figure above shows a nation's aggregate demand curve, aggregate supply curve, and potential GDP.
-In the figure above, to use fiscal policy to move the economy back to potential GDP, the government must increase government expenditure by ________ $1 trillion and/or decrease taxes by ________ $1 trillion.
A)recessionary; exactly; exactly 
B)inflationary; less than; less than 
C)recessionary; less than; more than 
D)recessionary; less than; less than 
E)recessionary; more than; more than

Quizplus · Accepted Answer

In a recessionary gap, increasing government expenditure or decreasing taxes by less than $1 trillion can stimulate aggregate demand to move the economy back to potential GDP.

20.3 Chapter Figures The Figure Above Shows a Nation's Aggregate Demand Curve, Aggregate