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OpenStudy (mermaidkyles):
How do government expenditures affect the economy?
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OpenStudy (hope210):
A decrease in taxes has the opposite effect on income, demand, and GDP. It will boost all three, which is why people cry out for a tax cut when the economy is sluggish. When the government decreases taxes, disposable income increases. That translates to higher demand (spending) and increased production (GDP).
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