If the economy is growing beyond potential real GDP, which of the following would be an appropriate fiscal policy to bring the economy back to long-run aggregate supply?

Question

Quizplus · Accepted Answer

If the economy is growing beyond potential real GDP, this means that it is operating at a level higher than its long-run aggregate supply. To bring the economy back to its long-run equilibrium, the government needs to decrease aggregate demand. One way to do this is through an increase in taxes, which would decrease disposable income and reduce consumption spending.

If the Economy Is Growing Beyond Potential Real GDP, Which