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You are an economic advisor to the president. You observe a decrease in gross investment. Assume the economy was operating at the full-employment level of
You are an economic advisor to the president. You observe a decrease in gross investment. Assume the economy was operating at the full-employment level of real GDP prior to the decrease in gross investment. Describe the state of the economy and advise the president on the appropriate policy action by completing the following sentences. a. The decrease in gross investment will lead to (Click to select) in aggregate demand. As a result, real GDP will (Click to select) . b. The problem that this event will cause is (Click to select) . c. Appropriate (Click to select) policy actions would include (Click to select) taxes and/or (Click to select) government purchases. d. These actions will smooth out the business cycle by (Click to select) actual real GDP back toward full-employment GDP
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