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Decrease government purchases

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Suppose real GDP is $13 trillion, potential real GDP is $13.5 trillion, and Congress and the president plan to use fiscal policy to restore the economy to potential real GDP. Assuming a constant price level, Congress and the president would need to increase government purchases by A) less than $500 billion. B) more than $500 billion. C) $500 billion. D) None of the above are correct. Congress must act to decrease government purchases in this case.

Reference no: EM131961834

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