Suppose There Is a Simultaneous Tax Increase and Open Market

question 14

Multiple Choice

Suppose there is a simultaneous tax increase and open market purchase of bonds. Which of the following must occur as a result of this policy mix?

• A) Output decreases.
• B) Output increases.
• C) The interest rate increases.
• D) The interest rate decreases.
• E) Both output and the interest rate increase.

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