3) A decrease in taxes should be applied in a situation with

		a recessionary gap.
		an inflationary gap.
		low unemployment.
		high demand for goods and services.

4) If the economy has been producing at a point where realGDP is less than potential GDP, what fiscal policy can the federalgovernment use to restore real GDP to potential GDP?

		cut government expenditure on goods and services.
		increase taxes.
		cut taxes.
		raise the interest rate.