Question

A $1 increase in government spending on goods and services will have a greater impact on the equilibrium GDP than will a $1 decline in taxes because

Answer 1

Answer:

Government spending creates employment or it employment-intensive as compared to a decline in tax.

Explanation:

Government spending is more employment-intensive as compared to tax. When the government dumps money into the economy then the economy becomes richer than the injected money because it creates employment and increases the aggregate demand. Moreover, GDP will increase more because it depends on the MPC and spending multiplier. While the tax decline is saving intensive when a tax falls then people try to save more.