If a government raises its expenditures by $50 billion and at the same time levies a lump-sum tax of $50 billion, the net effect on the economy will be to:

Question

a. increase GDP by less than $50 billion
b. increase GDP by more than $50 billion
c. increase GDP by $50 billion
d. make no change in GDP

Take a shot. Remember the difference between a taxation multiplier and a government spending multiplier.

Answer 1

jki

Answer 2

Make no change