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The use of tax revenue and government spending to affect the economy is________.
Assume the US economy is in short-run equilibrium at a real GDP below its potential real GDP. According to Keynesian theory, which of the following policies should be followed?
a. The federal government should do nothing because the economy will self-correct to potential real GDP.
b. The federal government should increase spending.
c. The Federal Reserve should decrease the money supply.
d. All of the above.
