An Equal Increase in Government Purchases and Taxes Will Cause

question 107

Multiple Choice

An equal increase in government purchases and taxes will cause

• A)an increase in real GDP.
• B)no change in real GDP.
• C)an increase in the budget surplus.
• D)a reduction in cyclically adjusted budget surplus.
• E)a reduction in interest rates.

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Definitions:

Trade Deficit

A situation where a country's imports of goods and services exceed its exports.

Excise Tax

A tax imposed on specific goods, services, and activities, such as gasoline, tobacco, and alcohol, often used to discourage their use and generate revenue.

Personal Income Tax

Tax imposed on individuals based on their income, including wages, salaries, and investment income.

Trade Deficit

A condition in which a nation's expenditures on imported goods and services surpass its income from exports, leading to a trade deficit.