If Real GDP Is Less Than Potential GDP, Which of the Following

question 67

Multiple Choice

If real GDP is less than potential GDP, which of the following fiscal policies would increase real GDP?

• A)a decrease in taxes
• B)an increase in government expenditures
• C)a fall in the interest rate
• D)Both A and B are correct
• E)Both B and C are correct.

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Definitions:

Production Increase

Represents the rise in the amount of goods and services produced by a company or economy, often aiming for higher efficiency and profitability.

Sales Level

The total volume or quantity of sales achieved by a business within a specific period.

Income Change

Income change refers to any variation, either an increase or decrease, in the amount of revenue or profit that an entity receives over a period.

Variable Costing

An approach to costing that accounts for only variable production expenses, including direct materials, direct labor, and variable manufacturing overhead, in the calculation of product costs.