Question

When the government levies a $100 million tax on people's income and puts the $100 million back into the economy in the form of a spending program, such as new interstate highway construction, the: Group of answer choices

A. tax, then, generates a $100 million decline in real GDP.

B. level of real GDP expands by $100 million.

C. effect on real GDP is uncertain.

D. tax multiplier overpowers the income multiplier, triggering a rollback in real GDP.

Answer 1

Answer and Explanation:

D. tax multiplier overpowers the income multiplier, triggering a rollback in real GDP.