A $100 Billion Increase in Government Purchases Has a Greater

Multiple Choice

A $100 billion increase in government purchases has a greater effect on real GDP than a $100 billion reduction in net taxes because

A) some of the income consumers gain from the tax reduction will be saved rather than spent
B) some of the income consumers gain from the tax reduction will be spent on services rather than products
C) some of the income consumers gain from the tax reduction will be spent on goods made in foreign countries
D) the consumers' MPC is higher than the government's
E) the consumers' MPC is 1