Question 1
Figure 16-10
Refer to Figure 16-10. In the graph above, suppose the economy in Year 1 is at point A and is expected in Year 2 to be at point B. Which of the following policies could Congress and the president use to move the economy to point C?
◦ increase income taxes
◦ increase government spending
◦ buy Treasury bills
◦ decrease the discount rate
Question 2
Table 16-1
Refer to Table 16-1. 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
◦ decrease income taxes.
◦ decrease government purchases.
◦ decrease the money supply.
◦ increase the level of interest rates.
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