POTENTIAL GDP REAL GDP PRICE LEVEL 2020 $1500 billion $1500 billion 100 2021 $1590 billion $1560 billion 105 Refer to the table above to answer the questions below: a) Explain whether a contractionary or an expansionary fiscal or monetary policy should be implemented in 2021. b) Based on you answer to part a) above, identity one monetary and fiscal policy instrument. c) If the economy is successful in keeping real GDP at its potential level in 2021, state whether each of the following will be higher, lower, or the same if this economy had taken no action. i Real GDP ii Potential GDP iii The inflation rate iv The unemployment rate d) Now let us suppose that real GDP in 2021 was higher than the potential GDP in 2021. What would your answer to part a) and part b) be under this scenario?
POTENTIAL GDP REAL GDP PRICE LEVEL 2020 $1500 billion $1500 billion 100 2021 $1590 billion $1560 billion 105 Refer to the table above to answer the questions below: a) Explain whether a contractionary or an expansionary fiscal or monetary policy should be implemented in 2021. b) Based on you answer to part a) above, identity one monetary and fiscal policy instrument. c) If the economy is successful in keeping real GDP at its potential level in 2021, state whether each of the following will be higher, lower, or the same if this economy had taken no action. i Real GDP ii Potential GDP iii The inflation rate iv The unemployment rate d) Now let us suppose that real GDP in 2021 was higher than the potential GDP in 2021. What would your answer to part a) and part b) be under this scenario?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
| YEAR | POTENTIAL |
REAL GDP | |
|---|---|---|---|
| 2020 | $1500 billion | $1500 billion | 100 |
| 2021 | $1590 billion | $1560 billion | 105 |
Refer to the table above to answer the questions below:
a) Explain whether a contractionary or an expansionary fiscal or
b) Based on you answer to part a) above, identity one monetary and fiscal policy instrument.
c) If the economy is successful in keeping real GDP at its potential level in 2021, state whether each of the following will be higher, lower, or the same if this economy had taken no action.
i Real GDP
ii Potential GDP
iii The inflation rate
iv The
d) Now let us suppose that real GDP in 2021 was higher than the potential GDP in 2021. What would your answer to part a) and part b) be under this scenario?
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