Suppose Real GDP Is $13 Trillion,potential Real GDP Is $13

question 304

Multiple Choice

Suppose real GDP is $13 trillion,potential real GDP is $13.5 trillion,and Congress and the president plan to use fiscal policy to restore the economy to potential real GDP.Assuming a constant price level,Congress and the president would need to increase government purchases by

• A)$500 billion.
• B)less than $500 billion.
• C)more than $500 billion.
• D)None of the above are correct.Congress must act to decrease government purchases in this case.

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Definitions:

Balance Sheet Item

An individual entry, such as assets, liabilities, or equity, that appears on the balance sheet, detailing a company's financial position at a specific point in time.

Total Assets

The sum of all resources owned by an entity, reflected on its balance sheet.

Return On Assets

A profitability ratio that measures how effectively a company uses its assets to generate profit, calculated as net income divided by total assets.

Profit Margin

a financial metric that shows the percentage of revenue remaining after all costs, expenses, and taxes have been deducted, indicating the efficiency and profitability of a company.