Suppose taxes paid by households are raised by $100 million in order to finance an additional $100 million of government spending (assume all govt spending occurs in Canada). Explain whether there would be a net increase, decrease or no effect in the Canadian aggregate demand as a result.

Suppose taxes paid by households are raised by $100 million in order to finance an additional $100 million of government spending (assume all govt spending occurs in Canada). Explain whether there would be a net increase, decrease or no effect in the Canadian aggregate demand as a result.

Macroeconomics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506756

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter12: Fiscal Policy, Incentives, And Secondary Effects

Section: Chapter Questions

Problem 8CQ

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