A $100 billion increase in government purchases will have the same effect on real GDP as a $100 billion decrease in taxes.

Name: A $100 billion increase in government purchases will have the same effect on real GDP as a $100 billion decrease in taxes.
Brand: Quizplus
Rating: 4.9 (33 reviews)

Question

Quizplus · Accepted Answer

A $100 billion increase in government purchases directly increases aggregate demand, while a $100 billion decrease in taxes increases disposable income, leading to a smaller initial increase in aggregate demand due to the marginal propensity to consume.

A $100 Billion Increase in Government Purchases Will Have the Same