If the Economy Is in an Equilibrium with Real GDP

question 108

Multiple Choice

If the economy is in an equilibrium with real GDP less than potential GDP,a fiscal stimulus could move the economy toward potential GDP by simultaneously ________ taxes and ________ government expenditures on goods and services.

• A)raising;increasing
• B)raising;decreasing
• C)cutting;increasing
• D)cutting;decreasing
• E)raising;not changing

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Definitions:

Coupon

The interest payment made to bondholders, typically expressed as an annual percentage of the bond's face value.

Coupon Bond

A type of bond that offers periodic interest payments to the holder through fixed "coupons" and the return of the principal at maturity.

Yield To Maturity

The total return expected on a bond if held until its maturity date, including both interest payments and capital gains.

Interest Annually

The amount of interest earned or paid over a one-year period.