Table 18-1
$\begin{array}{|c|l|l|c|}
\hline \text { Year } & \text { Potential Real GDP } & \text { Real GDP } & \text { Price Level } \
\hline 2018 & \$ 18.0 \text { trillion } & \$ 18.0 \text { trillion } & 150 \
\hline 2019 & 18.5 \text { trillion } & 18.2 \text { trillion } & 152 \
\hline
\end{array}$
-Refer to Table 18-1.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 want to keep real GDP at its potential level in 2019,they should

Question

Table 18-1
 $\begin{array}{|c|l|l|c|}
\hline \text { Year } & \text { Potential Real GDP } & \text { Real GDP } & \text { Price Level } \
\hline 2018 & \$ 18.0 \text { trillion } & \$ 18.0 \text { trillion } & 150 \
\hline 2019 & 18.5 \text { trillion } & 18.2 \text { trillion } & 152 \
\hline
\end{array}$
-Refer to Table 18-1.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 want to keep real GDP at its potential level in 2019,they should

Quizplus · Accepted Answer

If Congress and the president want to keep real GDP at its potential level in 2019, they should increase aggregate demand. One of the ways to do so is by decreasing income taxes, which would increase disposable income and consumption. Option B, decreasing government purchases, would decrease aggregate demand, leading to a fall in real GDP. Option C, decreasing the money supply, would lead to a decrease in aggregate demand, leading to a fall in real GDP. Option D, increasing the level of interest rates, would decrease investment and consumption, leading to a fall in aggregate demand and a fall in real GDP.

Table 18-1 -Refer to Table 18-1