Which of the following would increase GDP by the greatest amount?
A) A $20 billion reduction in taxes
B) $20 billion increases in both government spending and taxes
C) $20 billion decreases in both government spending and taxes
D) A $20 billion increase in government spending

Question

Quizplus · Accepted Answer

An increase in government spending directly contributes to GDP, as it increases the overall demand for goods and services in the economy. The other options either involve a decrease in government spending (which decreases demand) or a combination of both decreases and increases in government spending and taxes (which may have offsetting effects on GDP).

Which of the Following Would Increase GDP by the Greatest