An decrease in taxes combined with a decrease in government purchases would:

Question

Quizplus · Accepted Answer

The offsetting effects of the decrease in taxes and decrease in government purchases on AD are uncertain and could depend on a number of factors, such as the size of the changes, the initial level of the economy's output, the responsiveness of consumption and investment spending to changes in disposable income and interest rates, and the reactions of the central bank and other policymakers. As a result, it is difficult to predict with certainty what the net effect on aggregate demand would be.

An Decrease in Taxes Combined with a Decrease in Government