Table 17-2
$$\begin{array} { | c | c | c | c | }
\hline \text { Year } & \text { Potential Real GDP } & \text { Real GDP } & \text { Price Level } \
\hline 2014 & \$ 14.0 \text { trillion } & \$ 14.0 \text { trillion } & 150 \
\hline 2015 & 14.5 \text { trillion } & 14.2 \text { trillion } & 152 \
\hline
\end{array}$$
-Refer to Table 17-2.Consider the hypothetical information in the table above for potential real GDP,real GDP and the price level in 2014 and in 2015 if the Federal Reserve does not use monetary policy.If the Fed wants to keep real GDP at its potential level in 2015,it should
A)buy Treasury securities.
B)sell Treasury securities.
C)increase the required reserve ratio.
D)increase income taxes.

Question

Table 17-2
 $$\begin{array} { | c | c | c | c | } 
\hline \text { Year } & \text { Potential Real GDP } & \text { Real GDP } & \text { Price Level } \
\hline 2014 & \$ 14.0 \text { trillion } & \$ 14.0 \text { trillion } & 150 \
\hline 2015 & 14.5 \text { trillion } & 14.2 \text { trillion } & 152 \
\hline
\end{array}$$
-Refer to Table 17-2.Consider the hypothetical information in the table above for potential real GDP,real GDP and the price level in 2014 and in 2015 if the Federal Reserve does not use monetary policy.If the Fed wants to keep real GDP at its potential level in 2015,it should
A)buy Treasury securities.
B)sell Treasury securities.
C)increase the required reserve ratio.
D)increase income taxes.

Quizplus · Accepted Answer

To increase real GDP to its potential level, the Fed should buy Treasury securities, which increases the money supply and lowers interest rates, stimulating economic activity.

Table 17-2 -Refer to Table 17-2