A $100 Billion Increase in Government Purchases Has a Greater

question 117

Multiple Choice

A $100 billion increase in government purchases has a greater effect on real GDP than a $100 billion reduction in net taxes because

• A)some of the income consumers gain from the tax reduction will be saved rather than spent
• B)some of the income consumers gain from the tax reduction will be spent on services rather than products
• C)some of the income consumers gain from the tax reduction will be spent on goods made in foreign countries
• D)the consumers' MPC is higher than the government's
• E)the consumers' MPC is 1

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