Question : 21) Refer to Table 18-1. Consider the hypothetical information in : 1244874

 

 

21) Refer to Table 18-1. 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) decrease income taxes.

B) decrease government purchases.

C) decrease the money supply.

D) increase the level of interest rates.

Table 18-2

Year

Potential Real GDP

Real GDP

Price Level

2013

$14.0 trillion

$14.0 trillion

150

2014

  14.5 trillion

  14.8 trillion

154

 

22) Refer to Table 18-2. 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.

 

Table 18-3

Year

Potential Real GDP

Real GDP

Price Level

2013

$14.0 trillion

$14.0 trillion

150

2014

  14.5 trillion

  14.2 trillion

152

 

23) Refer to Table 18-3. 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 use fiscal policy successfully to keep real GDP at its potential level in 2014, which of the following will be higher than if the Congress and the president had taken no action?

A) real GDP and the unemployment rate

B) real GDP and the inflation rate

C) real GDP and potential GDP

D) potential GDP and the inflation rate

 

Table 18-4

Year

Potential Real GDP

Real GDP

Price Level

2013

$14.0 trillion

$14.0 trillion

150

2014

  14.5 trillion

  14.8 trillion

154

 

24) Refer to Table 18-4. 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 use fiscal policy successfully to keep real GDP at its potential level in 2014, which of the following will be lower than if the Congress and the president had taken no action?

A) real GDP and the unemployment rate

B) real GDP and the inflation rate

C) real GDP and potential GDP

D) potential GDP and the inflation rate

 

25) An appropriate fiscal policy response when aggregate demand is growing at a slower rate than aggregate supply is to cut taxes.

 

26) If real equilibrium GDP is above potential GDP, expansionary fiscal policy should be pursued.

 

27) An appropriate fiscal policy response when aggregate demand is growing at a faster rate than aggregate supply is to decrease the money supply.

 

28) To complement actions by the Fed to reduce inflation, Congress and the President can cut spending and/or raise taxes.

29) What are the key differences between how we illustrate an expansionary fiscal policy in the basic aggregate demand and aggregate supply model and in the dynamic aggregate demand and aggregate supply model?