Consider the hypothetical information in the following table for potential GDP , , real GDP , ,
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Question:
Consider the hypothetical information in the following table for potential GDP, real GDP, and the price level in 2018 and in 2019 if the government does not use fiscal policy.
Year | Potential GDP | Real GDP | Price Level |
2018 | $1.5 | $1.5 | 150 |
2019 | $1.7 | $1.6 trillion | 153 |
If the government wants to keep real GDP at its potential level in 2019, it should _________.
a.
decrease government purchases
b.
decrease income taxes
c.
increase interest rates
d.
decrease interest rates
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