When you compare the effects of government spending on aggregate demand with the effects of taxes on aggregate demand, the effects of government spending are
A)smaller.
B)larger.
C)the same.
D)impossible to predict.

Question

Quizplus · Accepted Answer

Government spending has a larger impact on aggregate demand than taxes because government spending directly injects money into the economy, whereas taxes take money out of the economy. With government spending, consumers have more money to spend, which increases aggregate demand. With taxes, consumers have less money to spend, which decreases aggregate demand.

When You Compare the Effects of Government Spending on Aggregate