Suppose real GDP is $1.3 trillion and potential GDP is $1.35 trillion. If the government increases government purchases by $0.5 trillion, then the economy will be brought to equilibrium at potential GDP.

Question

Quizplus · Accepted Answer

Increasing government purchases by $0.5 trillion would likely push the economy's total output beyond potential GDP, potentially causing inflationary pressures, rather than just bringing it to equilibrium at potential GDP.

Suppose Real GDP Is $1