Suppose real GDP is 13 trillion potential real GDP is 135 trillion and Congress

Suppose real gdp is 13 trillion potential real gdp is

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154) Suppose real GDP is $13 trillion, potential real GDP is $13.5 trillion, and Congress and thepresident plan to use fiscal policy to restore the economy to potential real GDP. Assuming aconstant price level, Congress and the president would need to decrease taxes by A) less than $500 billion.B) more than $500 billion.C) $500 billion.D) None of the above are correct. Congress should raise taxes in this case.Answer: A 154) Page Ref: 952 - 953/570 - 571 Learning Outcome: Macro - 9: Discuss fundamental approaches to fiscal policy. 155) Suppose real GDP is $14 trillion and potential real GDP is $14.4 trillion. An increase ingovernment purchases of $400 billion would cause real GDP to ________ potential real GDP(assuming a constant price level). 155) Page Ref: 952 - 953/570 - 571 Learning Outcome: Macro - 9: Discuss fundamental approaches to fiscal policy. 156) If the government purchases multiplier equals 2, and real GDP is $14 trillion with potential realGDP $14.5 trillion, then government purchases would need to increase by ________ to restore theeconomy to potential real GDP.156) Page Ref: 952 - 953/570 - 571 Learning Outcome: Macro - 9: Discuss fundamental approaches to fiscal policy. 42
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157) If the absolute value of the tax multiplier equals 1.6, real GDP is $13 trillion, and potential realGDP is $13.4 trillion, then taxes would need to be cut by ________ to restore the economy topotential real GDP.157) Page Ref: 952 - 953/570 - 571 Learning Outcome: Macro - 9: Discuss fundamental approaches to fiscal policy. 158) A tax rebate by the government would A) increase your disposable income, but not your pretax income.B) increase your pretax income, but not your disposable income.C) decrease your pretax income, but not your disposable income.D) decrease your disposable income, but not your pretax income.Answer: A 158) Page Ref: 951/569 Learning Outcome: Macro - 9: Discuss fundamental approaches to fiscal policy.
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