Assume Parliament enacts a $10 billion decrease in spending and a $10 billion decrease in tax revenue. The result of this balanced-budget approach is a:

Question

Quizplus · Accepted Answer

A $10 billion decrease in government spending directly reduces aggregate demand by $10 billion, while the $10 billion decrease in tax revenue offsets this by increasing disposable income, but not enough to fully counteract the spending cut.

Assume Parliament Enacts a $10 Billion Decrease in Spending and a $10