Suppose potential GDP is $20 trillion. If the economy produces at potential, then the government budget deficit is $1 trillion. If actual GDP is $19 trillion, the government deficit is $1.25 trillion. The increase in deficit that results from GDP below potential is the result of

Suppose potential GDP is $20 trillion. If the economy produces at potential, then the government budget deficit is $1 trillion. If actual GDP is $19 trillion, the government deficit is $1.25 trillion. The increase in deficit that results from GDP below potential is the result of

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Suppose potential GDP is $20 trillion. If the economy
produces at potential, then the government budget deficit is
$1 trillion. If actual GDP is $19 trillion, the government deficit
is $1.25 trillion. The increase in deficit that results from GDP
below potential is the result of

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