An increase in government spending of $300 billion and a tax cut of $300 billion will have _ effects on the budget balance and _ effects on real GDP. unequal; equal equal; equal equal; unequal unequal; unequal

Question

07-04-2020
Business

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An increase in government spending of $300 billion and a tax cut of $300 billion will have _ effects on the budget balance and _ effects on real GDP. unequal; equal equal; equal equal; unequal unequal; unequal

Respuesta :

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jepessoa jepessoa · Answer 1 · 2020-04-08T05:20:41+02:00

Answer:

An increase in government spending of $300 billion and a tax cut of $300 billion will have EQUAL effects on the budget balance and UNEQUAL effects on real GDP.

Explanation:

Both actions will increase the budget deficit by $300 billion each.

But the total effect of government spending in the aggregate demand is determined by the government spending multiplier = 1/marginal propensity to save (MPS).

On the other hand, the effect of the tax cut will be determined by the marginal propensity to consume (MPC).

An increase in government spending of $300 billion and a tax cut of $300 billion will have _____ effects on the budget balance and _____ effects on real GDP. unequal; equal equal; equal equal; unequal unequal; unequal

Respuesta :

Otras preguntas

An increase in government spending of $300 billion and a tax cut of $300 billion will have _ effects on the budget balance and _ effects on real GDP. unequal; equal equal; equal equal; unequal unequal; unequal