Government spending and taxes
A)do not change aggregate demand.
B)are an important component of aggregate supply.
C)do not play a big role in determining GDP.
D)are a major determinant of aggregate demand.

Question

Quizplus · Accepted Answer

Government spending and taxes play a major role in determining aggregate demand as they directly affect consumption and investment spending. An increase in government spending or a decrease in taxes can lead to a rise in aggregate demand, while a decrease in government spending or an increase in taxes can lead to a decrease in aggregate demand.

Government Spending and Taxes