Suppose Real GDP Is $1

question 277

Multiple Choice

Suppose real GDP is $1.7 trillion, potential real GDP is $1.75 trillion, and the federal government plans to use fiscal policy to restore the economy to potential real GDP.Assuming a constant price level, the federal government would need to decrease taxes by

• A)$50 billion.
• B)less than $50 billion.
• C)more than $50 billion.
• D)None of the above is correct.The federal government should raise taxes in this case.

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Definitions:

Par Value

The face value of a bond or stock as stated by the issuer, which has little relation to its market price.

Issued

The act of officially distributing or making something available, such as a public statement, document, currency, or security.

MBCA

Model Business Corporation Act, a template for state corporation statutes that provides legal guidelines for corporate governance and operations.

Articles of Incorporation

Legal documents filed with the state government to legally establish a corporation.