When the government levies a $100 million tax on people's income and puts the $100 million back into the economy in the form of a spending program, such as new interstate highway construction, the:

Question

Quizplus · Accepted Answer

When the government puts the $100 million back into the economy through a spending program, it creates an expansionary fiscal policy which increases aggregate demand and ultimately leads to an increase in real GDP. Therefore, the level of real GDP expands by $100 million.

When the Government Levies a $100 Million Tax on People's