Ask Question
14 November, 02:22

Consider the following statement: "Real GDP is currently $17.7 trillion, and potential real GDP is $17.4 trillion. If Congress and the president would decrease government purchases by $300 billion or increase taxes by $300 billion, the economy could be brought to equilibrium at potential GDP." If government purchases were to decrease by $300 billion or if taxes were increased by $300 billion, the equilibrium level of real GDP would decrease by

A. exactly $300 billion.

B. less than $300 billion.

C. more than $300 billion.

D. None of the above; equilibrium real GDP would actually increase.

Therefore the statement above is __.

+3
Answers (1)
  1. 14 November, 05:53
    0
    C. more than $300 billion.

    Explanation:

    option (C) because a decrease in gdp will be more than a decrease iin govt expenditure or a rise in govt tax, because of multplier effect.

    The given statement is False.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “Consider the following statement: "Real GDP is currently $17.7 trillion, and potential real GDP is $17.4 trillion. If Congress and the ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers