Business, 29.01.2020 03:50 genyjoannerubiera

An increase in taxes of a specific amount will have a smaller impact on the equilibrium gdp than will a decline in government spending of the same amount because:

- disposable income will fall by some amount smaller than the tax increase.
- declines in government spending always tend to stimulate private investment.
- some of the tax increase will be paid out of income that would otherwise have been saved.
- the mpc is smaller in the private sector than it is in the public sector.

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