Suppose real GDP is $12.6 trillion and potential GDP is $12.4 trillion.To move the economy back to potential GDP,Congress 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.

Question

Quizplus · Accepted Answer

Lowering government purchases by an amount less than $200 billion can help reduce the inflationary gap without causing a recession, moving the economy closer to its potential GDP.

Suppose Real GDP Is $12