A $500 increase in government spending contains more fiscal stimulus than a $500 tax cut.

Question

Quizplus · Accepted Answer

When the government increases its spending, it directly injects money into the economy, which can lead to an increase in aggregate demand and overall economic growth. On the other hand, a tax cut may not be entirely spent or invested, and some taxpayers may choose to save the money instead of spending it immediately. Therefore, a $500 increase in government spending would contain more fiscal stimulus than a $500 tax cut.

A $500 Increase in Government Spending Contains More Fiscal Stimulus