Equal Increases in Government Expenditures and Taxes Will

question 15

Multiple Choice

Equal increases in government expenditures and taxes will:

• A)cancel each other out so that the equilibrium level of output will remain unchanged.
• B)lead to an equal decrease in the equilibrium level of output.
• C)lead to an equal increase in the equilibrium level of output.
• D)lead to an increase in the equilibrium level of real GDP output that is larger than the initial change in government expenditures and taxes.
• E)lead to an increase in the equilibrium level of output that is smaller than the initial change in government expenditures and taxes.

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