Ignoring any supply?side ?effects, suppose the government is considering cutting taxes by? $100 billion or increasing government expenditures on goods and services by? $100 billion. Then

A.

the tax cut would increase aggregate demand and the increase in government expenditure would decrease aggregate demand.

B.

both policies would increase aggregate demand but the increase in government expenditure has a smaller effect.

C.

both policies would increase aggregate demand by the same amount.

D.

both policies would increase aggregate demand but the tax cut has a smaller effect.

E.

the tax cut would decrease aggregate demand and the increase in government expenditure would increase aggregate demand

Answer rating: 100% (QA)

The correct answer is B both policies would increase aggregate demand but the ... View the full answer