Which of the following ﬁscal policy changes would be the most expansionary?
A) a $40 billion increase in government spending
B) a $20 billion tax cut and $20 billion increase in government spending
C) a $10 billion tax cut and $30 billion increase in government spending
D) a $40 billion tax cut

Question

Quizplus · Accepted Answer

An increase in government spending directly injects money into the economy, leading to a larger multiplier effect compared to tax cuts, which depend on consumer spending behavior.

Which of the Following ﬁScal Policy Changes Would Be the Most