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An Increase in Government Spending Will

Question 25

Multiple Choice

An increase in government spending will


A) not affect aggregate demand unless it is debt-financed
B) not affect aggregate demand if it is financed by a tax increase of equal magnitude
C) decrease aggregate demand if it is financed by a tax increase of equal magnitude
D) stimulate aggregate demand by less than a tax decrease of equal magnitude
E) none of the above

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