When the government taxes and spends, each activity affects GDP in the same proportion.

Question

Quizplus · Accepted Answer

Taxation and spending by the government can have different effects on GDP. Taxes can lead to a decrease in consumption and investment, reducing GDP. However, government spending can increase GDP if it leads to increased demand and production. The extent of these effects can vary depending on the specific circumstances and policies.

When the Government Taxes and Spends, Each Activity Affects GDP