Table 16-3

-Refer to Table 16-3.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 use fiscal policy successfully to keep real GDP at its potential level in 2019,which of the following will be higher than if Congress and the president had taken no action?
A)real GDP and the unemployment rate
B)real GDP and the inflation rate
C)real GDP and potential GDP
D)potential GDP and the inflation rate

Question

Table 16-3
 
-Refer to Table 16-3.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 use fiscal policy successfully to keep real GDP at its potential level in 2019,which of the following will be higher than if Congress and the president had taken no action?
A)real GDP and the unemployment rate 
B)real GDP and the inflation rate 
C)real GDP and potential GDP 
D)potential GDP and the inflation rate

Quizplus · Accepted Answer

If Congress and the president use fiscal policy successfully to keep real GDP at its potential level in 2019, real GDP will be higher than if no action was taken. Additionally, since the economy is already operating at or above potential GDP in 2018, further stimulus would lead to an increase in the rate of inflation. Therefore, both real GDP and the inflation rate will be higher than if no action was taken. The unemployment rate, however, is not mentioned and cannot be determined from the given information.

Table 16-3 -Refer to Table 16-3.Consider the Hypothetical Information in the Table