Fiscal Policy - AP Macroeconomics

If potential GDP exceeds current GDP, the country is in a recessionary gap. The fiscal policies that are effective in closing a recessionary gap are to increase government spending or to decrease (not increase) taxes.

Note that Federal Reserve operations are monetary, not fiscal, policies.

Using the GDP equation , we see that any imports will be added to either Consumption or Investment, but will be subtracted from Net Exports by the same amount. This leads to a net change of zero.

The four phases of the business cycle are expansion, peak, contraction, and trough. A plateau is not one of these four phases.

A recessionary gap is defined as a situation in which real output is below potential output. In other words, the economy could be producing more than it is.

The answer choice "real output exceeds potential output" is incorrect; it describes an inflationary gap.

The answer choice "nominal output exceeds potential output" is incorrect; inflationary and recessariony gaps refer to real output levels, not nominal levels.

Fiscal policy is the use of government spending to influence the economy. As such, fiscal policy is outside of the scope of the Federal Reserve's powers - fiscal policy can only be initiated by Congress.

If potential GDP exceeds current GDP, the country is in a recessionary gap. The fiscal policies that are effective in closing a recessionary gap are to increase government spending or to decrease (not increase) taxes.

Note that Federal Reserve operations are monetary, not fiscal, policies.

Using the GDP equation , we see that any imports will be added to either Consumption or Investment, but will be subtracted from Net Exports by the same amount. This leads to a net change of zero.

The four phases of the business cycle are expansion, peak, contraction, and trough. A plateau is not one of these four phases.

A recessionary gap is defined as a situation in which real output is below potential output. In other words, the economy could be producing more than it is.

The answer choice "real output exceeds potential output" is incorrect; it describes an inflationary gap.

The answer choice "nominal output exceeds potential output" is incorrect; inflationary and recessariony gaps refer to real output levels, not nominal levels.

Fiscal policy is the use of government spending to influence the economy. As such, fiscal policy is outside of the scope of the Federal Reserve's powers - fiscal policy can only be initiated by Congress.

If potential GDP exceeds current GDP, the country is in a recessionary gap. The fiscal policies that are effective in closing a recessionary gap are to increase government spending or to decrease (not increase) taxes.

Note that Federal Reserve operations are monetary, not fiscal, policies.

Using the GDP equation , we see that any imports will be added to either Consumption or Investment, but will be subtracted from Net Exports by the same amount. This leads to a net change of zero.

The four phases of the business cycle are expansion, peak, contraction, and trough. A plateau is not one of these four phases.

A recessionary gap is defined as a situation in which real output is below potential output. In other words, the economy could be producing more than it is.

The answer choice "real output exceeds potential output" is incorrect; it describes an inflationary gap.

The answer choice "nominal output exceeds potential output" is incorrect; inflationary and recessariony gaps refer to real output levels, not nominal levels.

Using the GDP equation , we see that any imports will be added to either Consumption or Investment, but will be subtracted from Net Exports by the same amount. This leads to a net change of zero.

The four phases of the business cycle are expansion, peak, contraction, and trough. A plateau is not one of these four phases.

A recessionary gap is defined as a situation in which real output is below potential output. In other words, the economy could be producing more than it is.

The answer choice "real output exceeds potential output" is incorrect; it describes an inflationary gap.

The answer choice "nominal output exceeds potential output" is incorrect; inflationary and recessariony gaps refer to real output levels, not nominal levels.

Using the GDP equation , we see that any imports will be added to either Consumption or Investment, but will be subtracted from Net Exports by the same amount. This leads to a net change of zero.

The four phases of the business cycle are expansion, peak, contraction, and trough. A plateau is not one of these four phases.