Suppose real GDP is $1.7 trillion, potential real GDP is $1.8 trillion, and the federal government plans to use fiscal policy to restore the economy to potential real GDP.Assuming a constant price level, the federal government would need to increase government purchases by
A) $100 billion.
B) less than $100 billion.
C) more than $100 billion.
D) None of the above is correct.The federal government must decrease government purchases in this case.
Correct Answer:
Verified
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