Consider the Hypothetical Information in the Following Table for Potential

question 11

Multiple Choice

Consider the hypothetical information in the following table for potential GDP,real GDP,and the price level in 2016 and in 2017 if the government does not use fiscal policy. $$\begin{array} { | c | c | c | c | } \hline \text { Year } & \text { Potential GDP } & \text { Real GDP } & \text { Price Level } \\\hline 2016 & \$ 1.5 \text { trillion } & \$ 1.5 \text { trillion } & 150 \\\hline 2017 & \$ 1.7 \text { trillion } & \$ 1.8 \text { trillion } & 154 \\\hline\end{array}$$ If the government wants control inflation while keeping real GDP at its potential level in 2017,it should ________.

• A) increase income taxes
• B) increase government purchases
• C) decrease interest rates
• D) increase interest rates

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Definitions:

Financial Statements

Documents that provide an overview of a company's financial condition, including the balance sheet, income statement, and cash flow statement.

Accounting Statements

Financial documents that summarize the financial status and performance of a company, including the balance sheet, income statement, and cash flow statement.

Corporate Income Tax

A tax imposed on the net income or profit of corporations, calculated as a percentage of their earnings.

Working Capital

The gap between a business's present assets versus its current debts, showcasing the liquid funds for operational needs.