What Happens to Aggregate Demand When Government Spending and the Taxes

question 109

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:

Consistency

The quality of always behaving or performing in a similar way, or of always occurring at the same rate or level.

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The financial cost associated with purchasing academic textbooks, often noted for being significantly high.

Correlation Coefficient

A statistical measure that calculates the strength and direction of a linear relationship between two quantitative variables.