Suppose the government is deciding between either a reduction in income taxes or an increase in government purchases.
(A) Accorchig to the spenclig allacation matel melle hele canstant, what effect will the reduction in incame taxes have an the interest rate?
(B) Accorfling to the spenfling allocation model all else held constant what effect will the increase in government purchases have an the interest rate?
(C) Consider the following statement and exalan whether it is carrect ar incarrect. Because the reduction in incame taxes and the increase in covernment purchases heve the same effect an the interest rate, the twa policies have the sane effect an the ecanary.

Question

Suppose the government is deciding between either a reduction in income taxes or an increase in government purchases.
 (A) Accorchig to the spenclig allacation matel melle hele canstant, what effect will the reduction in incame taxes have an the interest rate?
(B) Accorfling to the spenfling allocation model all else held constant what effect will the increase in government purchases have an the interest rate?
(C) Consider the following statement and exalan whether it is carrect ar incarrect. Because the reduction in incame taxes and the increase in covernment purchases heve the same effect an the interest rate, the twa policies have the sane effect an the ecanary.

Quizplus · Accepted Answer

The Answer of Suppose the government is deciding between either a reduction in income taxes or an increase in government purchases.
 (A) Accorchig to the spenclig allacation matel melle hele canstant, what effect will the reduction in incame taxes have an the interest rate?
(B) Accorfling to the spenfling allocation model all else held constant what effect will the increase in government purchases have an the interest rate?
(C) Consider the following statement and exalan whether it is carrect ar incarrect. Because the reduction in incame taxes and the increase in covernment purchases heve the same effect an the interest rate, the twa policies have the sane effect an the ecanary.

Suppose the Government Is Deciding Between Either a Reduction in Income