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Equal Increases in Government Expenditures and Taxes Will

Question 22

Multiple Choice

Equal increases in government expenditures and taxes will:


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

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