Equal increases in government spending and taxes will:
A) cancel each other out so that the equilibrium level of real GDP will remain unchanged.
B) lead to an equal decrease in the equilibrium level of real GDP.
C) lead to an equal increase in the equilibrium level of real GDP.
D) lead to an increase in the equilibrium level of real GDP real GDP that is larger than the initial change in government spending and taxes.
E) lead to an increase in the equilibrium level of output that is smaller than the initial change in government spending and taxes.
Correct Answer:
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