If government spending on goods and services is increased by exactly the same amount that taxes are increased,the level of GDP will not change.

Question

Quizplus · Accepted Answer

Increasing government spending and taxes by the same amount can still change the level of GDP due to the multiplier effect. Government spending directly increases demand, while the impact of a tax increase on spending can be less immediate or smaller, leading to a net increase in GDP.

If Government Spending on Goods and Services Is Increased by Exactly