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

question 24

Multiple Choice

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

• A)$500 billion.
• B)less than $500 billion.
• C)more than $500 billion.
• D)None of these options is correct. The government must act to decrease government purchases in this case.

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World War II

A global conflict lasting from 1939 to 1945, involving most of the world's nations, and marked by significant historical events such as the Holocaust and the use of atomic bombs.

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