Which of the following would increase GDP by the greatest amount?
A)a $20 billion reduction in taxes
B)$20 billion increases in both government spending and taxes
C)$20 billion decreases in both government spending and taxes
D)a $20 billion increase in government spending

Question

Quizplus · Accepted Answer

A $20 billion increase in government spending directly increases GDP by the full amount, as it is an injection into the economy. Other options involve offsets or leakages that reduce the net impact on GDP.

Which of the Following Would Increase GDP by the Greatest