Refer to Table 27-1. Consider the hypothetical information in the table above for potential real GDP, real GDP, and the price level in 2016 and in 2017 if Congress and the president do not use fiscal policy
If Congress and the president want to keep real GDP at its potential level in 2017, they should
A) increase the level of interest rates. B) decrease the money supply.
C) decrease government purchases. D) decrease income taxes.
D
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Suppose goods A and B are complements. If the price of good A increases, will the demand for good B increase or decrease?
Suppose that the Fed implements expansionary monetary policy that raises aggregate demand, but individuals incorrectly anticipate the policy measure (bias downward). According to new classical theory, in the short run the price level would ____________ and Real GDP would ______________. In the long run, new classical theory would predict that the price level would ___________compared to its
original long-run equilibrium level and that Real GDP would ____________. A) rise; decline; rise; remain unchanged B) rise; rise; rise; remain unchanged C) rise; decline; remain unchanged; rise D) fall; rise; remain unchanged; rise