If the Federal Government Lowers Taxes

Multiple Choice

If the federal government lowers taxes:

A) aggregate expenditure will fall, leading to a decrease in equilibrium GDP.
B) consumption and investment will increase, leading to a rise in aggregate expenditure and an increase in equilibrium GDP.
C) the government will experience a budget deficit, which will lower aggregate expenditures.
D) aggregate expenditure will rise, leading to an increase in equilibrium GDP.