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Macroeconomics

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Moderate

Equal Increases in G and T

MACRO-G0HAWP

Assume an equal increase in government spending ($G$) and in taxes ($T$), which of the following is true, when the AS is upward sloping?

A

There will be no change in AD.

B

AD will increase and so will real GDP.

C

AD will increase but there will be no change in real GDP.

D

Only aggregate supply will increase and will increase real GDP.

E

AD will increase and AS will decrease leading to no change in real GDP and a reduction in the price level.