Suppose real GDP is $1.7 trillion, potential real GDP is $1.8 trillion, and the federal government plans to use fiscal policy to restore the economy to potential real GDP. Assuming a constant price level, the federal government would need to increase government purchases by

Question 42 options:

$100 billion.

less than $100 billion

more than $100 billion.

None of the above is correct. The federal government must decrease government purchases in this case.