Answer to Question #269434 in Macroeconomics for dnl

Question

Suppose Congress had chosen to both increase government

spending and raise taxes by the same amount in

2009. What increase in government spending and taxes

would have been required to prevent the decline in output

in 2009?

Answer 1

Both government disbursal and taxation have effects on a country's output. A rise in government spending and a rise in taxes can have opposite effects on total disbursal and spending within the economy.