A $1 increase in government spending on goods and services will have a greater impact upon equilibrium GDP than will a $1 decline in taxes because:

Question

Quizplus · Accepted Answer

A portion of a tax cut is typically saved by the recipients rather than spent, which reduces the initial impact of the tax cut on aggregate demand compared to direct government spending, where the full amount directly enters the economy.

A $1 Increase in Government Spending on Goods and Services