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Question

Suppose the economy is currently experiencing a recessionary gap. Which of the following fiscal policy options is most likely to increase real GDP by the largest amount?

Answer

A rise in GDP can be achieved through an increase in government spending or a decrease in taxes. In terms of fiscal strategy, expansionary policies, such as expanding government spending, lowering taxes, or increasing government transfers, can enhance output, employment, and price level by raising aggregate demand. On the other hand, if inflation is becoming a concern, contractionary fiscal policy is employed to decrease the pace of economic expansion. This approach is different from the expansionary strategy, as it requires an increase in taxes and a decrease in spending. With less disposable income, consumers are likely to spend less, which can hinder economic growth and stimulus. For more information on GDP, please visit brainly.com/question/15682765 #SPJ4.