The combined effect of changes in government purchases and net taxes can be determined by adding their individual effects.

Question

Quizplus · Accepted Answer

The combined effect of changes in government purchases and net taxes can be determined by adding their individual effects because both factors affect aggregate demand in the same direction. An increase in either government purchases or a decrease in net taxes will increase aggregate demand and lead to an expansion of output and employment. By adding their effects, we can determine the overall impact on the economy.

The Combined Effect of Changes in Government Purchases and Net