Table 27-1
$$\begin{array} { | c | l | l | c | }
\hline \text { Year } & \text { Potential Real GDP } & \text { Real GDP } & \text { Price Level } \
\hline 2016 & \$ 18.0 \text { trillion } & \$ 18.0 \text { trillion } & 150 \
\hline 2017 & 18.5 \text { trillion } & 18.2 \text { trillion } & 152 \
\hline
\end{array}$$
-Refer to Table 27-1.Consider the hypothetical information in the table above for potential real GDP,real GDP,and the price level in 2016 and in 2017 if Congress and the president do not use fiscal policy.If Congress and the president want to keep real GDP at its potential level in 2017,they should

Question

Table 27-1
 $$\begin{array} { | c | l | l | c | } 
\hline \text { Year } & \text { Potential Real GDP } & \text { Real GDP } & \text { Price Level } \
\hline 2016 & \$ 18.0 \text { trillion } & \$ 18.0 \text { trillion } & 150 \
\hline 2017 & 18.5 \text { trillion } & 18.2 \text { trillion } & 152 \
\hline
\end{array}$$
-Refer to Table 27-1.Consider the hypothetical information in the table above for potential real GDP,real GDP,and the price level in 2016 and in 2017 if Congress and the president do not use fiscal policy.If Congress and the president want to keep real GDP at its potential level in 2017,they should

Quizplus · Accepted Answer

If Congress and the president want to keep real GDP at its potential level in 2017, they should decrease income taxes. This would increase disposable income and lead to an increase in consumer spending, which would help boost aggregate demand and maintain real GDP at its potential level. Decreasing government purchases would decrease aggregate demand and potentially lead to a recession if it goes below potential GDP. Decreasing the money supply or increasing the level of interest rates would decrease investment and consumer spending, leading to a decrease in aggregate demand and potentially a recession.

Table 27-1 -Refer to Table 27-1