Increased government _____ lead(s) to a larger increase in GDP when compared to the same reduction in _____.

Question

Quizplus · Accepted Answer

When the government increases its spending, it injects more money into the economy which can lead to an increase in GDP as businesses and individuals have more money to spend, invest, and create jobs. On the other hand, if taxes are reduced, individuals and businesses may have more disposable income, but there is no guarantee that they will inject that money back into the economy, leading to a potentially smaller increase in GDP. Therefore, an increase in government spending (choice A) would lead to a larger increase in GDP when compared to the same reduction in taxes (choice B). Choices C and D are not relevant to the comparison of government spending and taxes.

Increased Government _____ Lead(s) to a Larger Increase in GDP