Equal increases in government expenditures and tax collections will leave the equilibrium GDP unchanged.

Name: Equal increases in government expenditures and tax collections will leave the equilibrium GDP unchanged.
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Question

Quizplus · Accepted Answer

When government expenditures and tax collections increase equally, the equilibrium GDP will increase because the multiplier effect of government spending is typically larger than the tax multiplier, leading to a net positive impact on GDP.

Equal Increases in Government Expenditures and Tax Collections Will Leave