If the government wishes to increase the level of real GDP, it might reduce
A) taxes.
B) transfer payments.
C) the size of the budget deﬁcit.
D) its purchases of goods and services.

Question

Quizplus · Accepted Answer

Reducing taxes increases disposable income for households and firms, which stimulates consumption and investment spending, respectively. This leads to an increase in aggregate demand and real GDP.

If the Government Wishes to Increase the Level of Real