Tax changes generally have less of an impact on equilibrium income than do changes in government spending.

Question

Quizplus · Accepted Answer

Tax changes tend to have less of an impact on overall aggregate demand and equilibrium income compared to changes in government spending, as changes in government spending directly contribute to the level of demand in the economy. Tax changes only indirectly affect demand through changes in disposable income and consumer expenditures.

Tax Changes Generally Have Less of an Impact on Equilibrium