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27 August, 22:15

According to the model developed in Chapter 3, when government spending increases and taxes increase by an equal amount:

A) consumption and investment both increase.

B) consumption and investment both decrease.

C) consumption increases and investment decreases.

D) consumption decreases and investment increases.

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Answers (1)
  1. 27 August, 22:34
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    Correct answer is (B) consumption and investment both decrease.

    Explanation:

    when government spending increases and taxes increase by an equal amount there will be decrease in both consumption and investment.
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