Question

The economy’s output, real GDP, has drastically dropped. What are the possible fiscal policy solutions to return the real GDP to its higher production level? g

Answer 1

Answer:

1. decrease taxes

2. increase government spending

Explanation:

GDP stands for Gross Domestic Product. It is a country total produces in terms of services and goods in an fiscal year or financial year.

According to the question, if the real GDP drops, then a fiscal policy to increase the GDP, the Government should decease the taxes as it will motivate the workers and the employees to work more to increase the products.

Also increasing the spending of the Government in the form of subsidies so that output will increase.

Therefore, the possible fiscal solutions to make the real GDP rise to a higher level are  :

1. decrease taxes

2. increase government spending