Question 1
Table 16-2
Refer to Table 16-2. 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
◦ buy Treasury securities.
◦ conduct expansionary fiscal policy.
◦ decrease government purchases.
◦ decrease the discount rate.
Question 2
Table 16-3
Refer to Table 16-3. 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 use fiscal policy successfully to keep real GDP at its potential level in 2017, which of the following will be higher than if Congress and the president had taken no action?
◦ real GDP and the unemployment rate
◦ real GDP and the inflation rate
◦ real GDP and potential GDP
◦ potential GDP and the inflation rate
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