An increase in government expenditure can ________ potential GDP and an increase in taxes can ________ potential GDP.

Name: An increase in government expenditure can ________ potential GDP and an increase in taxes can ________ potential GDP.
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Question

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An increase in government expenditure can stimulate economic activity by boosting demand, potentially increasing potential GDP. Conversely, an increase in taxes can reduce disposable income and consumption, potentially decreasing potential GDP.

An Increase in Government Expenditure Can ________ Potential GDP and an Increase