Suppose the economy is in a deflationary gap. Which of the following public poli
ID: 1097992 • Letter: S
Question
Suppose the economy is in a deflationary gap. Which of the following public policies would help bring the economy towards potential GDP? A) decrease transfer payment B) lower the discount rate C) increase the required reserve deposit ratio D) increase marginal tax rates Suppose the economy is in a deflationary gap. Which of the following public policies would help bring the economy towards potential GDP? A) decrease transfer payment B) lower the discount rate C) increase the required reserve deposit ratio D) increase marginal tax ratesExplanation / Answer
D) increase marginal tax rates
potential GDP, is a measurement of what a country's gross domestic product would be if it were operating at full employment and utilizing all of its resources. This amount is generally higher than the actual gross domestic product, or GDP, of a country. As a result, the separation between a country's potential GDP and its real GDP is known as the output gap. The output gap is caused by the fact that most economies suffer from certain inefficiencies, such as inflation, unemployment, and government regulations, which hamper production levels.
One of the major economic factors which helps to measure economic strength is the gross domestic product. The GDP totals up the value of all of the goods produced in a specific country over a certain period of time. Economists watch how the GDP in a specific nation rises and falls, and they also check how it compares to the GDP levels achieved by other nations. It is important to realize where production levels are lacking within a country compared to where they could be, which is where the potential GDP comes into play thts why by increase marginal tax rates public policies would help bring the economy towards potential GDP
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