A one billion dollar increase in government purchases will


A one billion dollar increase in government purchases will have a greater effect (multiplier is greater) on GDP than a one billion dollar decrease in taxes because:

tax cuts increase the deficit; an increase in government purchases does not.

households generally maintain their level of saving even though taxes rise.

a tax cut is not all spent; instead part is saved.

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Business Economics: A one billion dollar increase in government purchases will
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