A tax decrease will have less of a direct impact on income, employment, and output than will an equivalent increase in government spending.

Question

Quizplus · Accepted Answer

When government spending increases, it directly injects money into the economy which can boost employment, income, and output. On the other hand, a tax decrease may have less of a direct impact on these factors as it relies on individuals to choose to spend or invest the money saved from taxes. It may also depend on the overall economic conditions and factors such as consumer confidence.

A Tax Decrease Will Have Less of a Direct Impact