What Happens to Aggregate Demand When Government Spending and the Taxes

question 106

Multiple Choice

What happens to aggregate demand when government spending and the taxes to pay for it both rise by the same amount?

• A)Aggregate demand falls by the amount of the government spending.
• B)There is no effect.
• C)Aggregate demand rises by the amount of the government spending.
• D)Aggregate demand rises by the amount of the government spending times the multiplier.

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Definitions:

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