if-the-economy-is-in-a-recession-and-the-current-aggregate-demand-is-500-billion

Question

If the economy is in a recession and the current aggregate demand is $500 billion below the potential GDP, what fiscal policy action could help achieve long-run equilibrium?

Accepted Answer

Increase government spending by $500 billion.

Answer

Decrease taxes by $500 billion.

Answer

Decrease government spending by $500 billion.

Answer

Increase taxes by $500 billion.

If the economy is in a recession and the current aggregate demand is \$500 billion below the potential GDP, what fiscal policy action could help achieve long-run equilibrium?