Question

An increase in government spending of $300 billion and a tax cut of $300 billion will have _____ effects on the budget balance and _____ effects on real gdp.

Answer 1

An increase in government spending of $300 billion and a tax cut of $300 billion will have equal effects on the budget balance and unequal effects on real Gross Domestic Product (GDP). Expansionary will be the effect of a government deficit.