A $1 Increase in Government Spending on Goods and Services

Multiple Choice

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

A) government spending is more employment intensive than is either consumption or investment spending.
B) government spending increases the money supply and a tax reduction does not.
C) a portion of a tax cut will be saved.
D) taxes vary directly with income.