Suppose real GDP is $1.6 trillion and potential GDP is $1.4 trillion.To move the economy back to potential GDP, the federal government should
A) lower government purchases by an amount less than $200 billion.
B) lower government purchases by $200 billion.
C) raise taxes by $200 billion.
D) lower taxes by $200 billion.
E) raise taxes by an amount more than $200 billion.
Correct Answer:
Verified
Q70: The aggregate demand curve will shift to
Q117: Table 12.3 Q118: Figure 12.7 Q119: Economists refer to the series of induced Q120: To combat inflation, the federal government could Q121: The tax multiplier equals the change in Q126: The government purchases multiplier equals the change Q138: A decrease in the tax rate will Q150: In absolute value,the tax multiplier is greater Q180: Suppose Political Party A proposes a tax
A)decrease
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