A one billion dollar increase in government purchases will have a greater effect

Question

A one billion dollar increase in government purchases will have a greater effect (multiplier is greater) on GDP than a one billion dollar decrease in taxes because

Question options:

households generally maintain their level of saving even though taxes rise.

a tax cut is not all spent; instead part is saved.

there is no difference. They both have the same effect.

households generally maintain their level of saving even though taxes rise.

a tax cut is not all spent; instead part is saved.

there is no difference. They both have the same effect.

Explanation / Answer

The correct answer is option (C). There is no difference. They both have the same effect.

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.