Table 27-3 -Refer to Table 27-3. Consider the Hypothetical Information in the Hypothetical

question 99

Multiple Choice

Table 27-3

-Refer to Table 27-3. Consider the hypothetical information in the table above for potential real GDP, real GDP and the price level in 2013 and in 2014 if the Congress and the president do not use fiscal policy. If the Congress and the president use fiscal policy successfully to keep real GDP at its potential level in 2014, which of the following will be higher than if the Congress and the president had taken no action?

• A) real GDP and the unemployment rate
• B) real GDP and the inflation rate
• C) real GDP and potential GDP
• D) potential GDP and the inflation rate

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Definitions:

Pareto Optimal

A resource distribution paradigm where it's unattainable to ameliorate the situation of one individual without diminishing that of another.

Utility Functions

Representations of an individual's preference ordering over a set of goods or outcomes, quantifying the satisfaction obtained from each.

Private Goods Consumption

The act of consuming goods that are excludable and rivalrous in nature, implying that one individual's consumption of the good prevents others from consuming the same unit of the good.

Clarke Tax

A taxation mechanism designed to make individuals reveal their true valuation for a public good.