If Government Spending and Taxes Increase by the Same Amount

question 34

Multiple Choice

If government spending and taxes increase by the same amount,

• A)the IS curve does not shift
• B)the IS curve shift leftward
• C)the IS curve shifts rightward
• D)the LM curve shifts downward

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Definitions:

Price Mechanism

The way in which prices rise and fall to balance supply and demand, allocating resources efficiently in a market economy.

Competing Firms

are companies operating in the same industry or market that offer similar products or services to consumers.

Government Regulate

The activities undertaken by government authorities to control or oversee specific industries, practices, or market activities usually to ensure public welfare or fair market competition.

Economic System

The structure of methods and principles a society uses to produce and distribute goods and services.