Assuming that there are NO income taxes,if both autonomous taxes,and government expenditures were to rise by $100 million,we would expect equilibrium GDP to
A)rise by $100 million.
B)rise,but by a multiple of $100 million.
C)rise by less than $100 million.
D)remain unaffected because leakages have changed by the same amount.

Question

Quizplus · Accepted Answer

With no income taxes, an increase in autonomous taxes and government expenditures by $100 million will increase aggregate demand by $100 million, leading to an increase in equilibrium GDP by the same amount. There are no leakages to account for in this scenario, so the answer is A.

Assuming That There Are NO Income Taxes,if Both Autonomous Taxes,and