If the economy is currently in equilibrium at a level of GDP that is above potential GDP,which of the following would move the economy back to potential GDP?
A)a decrease in wealth
B)a decrease in interest rates
C)an increase in business confidence
D)a decrease in the value of the dollar relative to other currencies

Question

Quizplus · Accepted Answer

A decrease in wealth would likely lead to a reduction in consumer spending, which in turn would decrease aggregate demand. This reduction in aggregate demand could help move the economy back towards its potential GDP, especially if the economy is currently operating above its potential output level.

If the Economy Is Currently in Equilibrium at a Level