In the above figure, the efficient quantity is

Refer to Table 15-1. The hypothetical information in the table shows what the values for real GDP and the price level will be in 2017 if the Fed does not use monetary policy

Which of the following policies makes sense if the Fed wants to keep real GDP at its potential level in 2017? A) The Fed should lower capital gains taxes. B) The Fed should lower the target for the federal funds rate. C) The Fed should pursue contractionary policy. D) The trading desk should sell Treasury securities.

An economy with an expansionary gap will, in the absence of stabilization policy, eventually experience a(n) ________ in the inflation rate, leading to a(n) ________ in output.

A. decrease; increase B. increase; increase C. decrease; decrease D. increase; decrease