Refer to Table 16-4. Consider the hypothetical information in the table above fo

Question

Refer to Table 16-4. Consider the hypothetical information in the table above for potential real GDP. real GDP and the price level in 2013 and in 2014 if the Congress and the president do not use fiscal policy. If the Congress and the president use fiscal policy successfully to keep real GDP at its potential level in 2014. which of the following will be lower than if the 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

Explanation / Answer

Answer- C- real GDP and Potential GDP

We know that when economy grows more slowly than its potential level, this will create unemployment in the economy. Suppose the GDp is faster than potential GDP then falls the rate of unemployment.

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