Consider a simple macro model with a constant price level and demand-determined output.The inclusion of government in such a model affects desired aggregate expenditure directly through ________ and indirectly through ________.
A)the net taxes; the government purchases of goods and services
B)the net taxes; its affect on disposable income
C)the government purchases of goods and services; its effect on net exports
D)the government purchases of goods and services; its effect on disposable income
E)the government purchases of goods and services; its effect on investment

Question

Quizplus · Accepted Answer

Government purchases directly increase aggregate expenditure, while changes in net taxes affect disposable income, influencing consumption and thus aggregate expenditure indirectly.

Consider a Simple Macro Model with a Constant Price Level