What is the effect of a decrease in both government spending and taxes by the same amount?
A)GDP will fall but unemployment will rise.
B)GDP will rise and unemployment will fall.
C)Both GDP and unemployment will fall.
D)Both GDP and unemployment will rise.
E)There will be no effect on GDP or unemployment.

Question

Quizplus · Accepted Answer

A decrease in government spending reduces aggregate demand, leading to a decrease in GDP. As GDP falls, unemployment typically rises due to lower production needs.

What Is the Effect of a Decrease in Both Government