If government purchases increase and net taxes decrease,_____.
A)the price level will fall
B)money supply must rise
C)the aggregate demand curve shifts leftward
D)aggregate supply shifts rightward
E)output and employment will increase

Question

Quizplus · Accepted Answer

An increase in government purchases and a decrease in net taxes will both increase aggregate demand, which will lead to an increase in output and employment (as seen in the Keynesian model). None of the other choices represent the correct outcome of this policy combination.

If Government Purchases Increase and Net Taxes Decrease,_____