15 of 25 Point E1 represents the following: LRASn SRAS, 135 SRAS 130 125 E, 120 Price Level (base year = 100) 105 AD, 100 AD. 95 90 + 0 100 200 300 400 500 600 700 800 Real GDP (billions of constant dollars) O The potential GDP O Inflationary gap O Deflationary gap O Recession18 of25 The total accumulated amount the government has borrowed, over time, and not yet paid back is known as 0 government deficit. 0 national debt. O government surplus. O outstanding payments. 19 of 25 Assume there is a decrease in the aggregate demand, if expansionary fiscal policy is being used, the following action could be taken: 0 increase consumption by raising disposable income through cuts in personal taxes or payroll taxes. 0 increase investment spending by raising after-tax profits through cuts in business taxes. O increase government purchases through increased federal government spending on final goods and services and raising federal grants to state and local governments to increase their expenditures on nal goods and services. O All ofthe above 16 of 25 Approximately 0 71% O 27% O 29% O 24% of federal spending is accounted for in four categories (national defense, social security, health care and interest payments)