If the Government Increases Its Spending, Which of the Following

question 21

Multiple Choice

If the government increases its spending, which of the following would tend to reduce the size of the multiplier?

• A) higher taxes for the finance of the additional spending
• B) higher interest rates as the result of additional borrowing to finance the spending
• C) the flow of the spending into sectors where the unemployment rate is low
• D) all of the above

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