Table 27-2

-Refer to Table 27-2. Consider the hypothetical information in the table above for potential real GDP, real GDP and the price level in 2013 and in 2014 if the Congress and the president do not use fiscal policy. If the Congress and the president want to keep real GDP at its potential level in 2014, they should
A) buy Treasury securities.
B) conduct expansionary fiscal policy.
C) decrease government purchases.
D) decrease the discount rate.

Question

Table 27-2
 
-Refer to Table 27-2. Consider the hypothetical information in the table above for potential real GDP, real GDP and the price level in 2013 and in 2014 if the Congress and the president do not use fiscal policy. If the Congress and the president want to keep real GDP at its potential level in 2014, they should
A) buy Treasury securities. 
B) conduct expansionary fiscal policy. 
C) decrease government purchases. 
D) decrease the discount rate.

Quizplus · Accepted Answer

To keep real GDP at its potential level, the government should decrease government purchases to reduce aggregate demand, preventing the economy from overheating and maintaining GDP at its potential level.

Table 27-2 -Refer to Table 27-2. Consider the Hypothetical Information in the Hypothetical