Suppose Real GDP Exceeds Potential GDP

question 168

Multiple Choice

Suppose real GDP exceeds potential GDP. If the government decreases its expenditures on goods and services, then real GDP ________ and the price level ________.

• A) decreases; rises
• B) increases; falls
• C) decreases; falls
• D) increases; rises

---

Definitions:

Permafrost

Permanently frozen subsoil characteristic of frigid areas such as the tundra.

Growing Season

The growing season is the period of the year when weather conditions are favorable for plant growth, typically characterized by sufficient warmth and moisture.

Tropical Rain Forest

A dense, warm, wet biome found near the Equator, known for its vast biodiversity.

Precipitation

The process by which water condenses from the atmosphere and falls to the earth's surface as rain, snow, sleet, or hail.