An equal increase in government purchases and taxes will cause

Name: An equal increase in government purchases and taxes will cause
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Question

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An equal increase in government purchases and taxes will lead to an increase in real GDP due to the government spending multiplier being larger than the tax multiplier. This is because the initial spending directly increases demand, while the tax increase only indirectly affects demand through reducing disposable income.

An Equal Increase in Government Purchases and Taxes Will Cause