aggregate deman will increase or decrease if

not multiple choices, but ture or false questions (actually increase or decrease questions) aggregate deman will (A) increase or decrease if government increase borrowing ___________ (B) increase or decrease if government cut taxes ___________ © increase or decrease if government increase borrowing to finance the tax cut _______

A/ increase in gov’s borrowing --> interest rate up --> AD down as more reward to delay consumption and less investment but I’m wondering if the gov spending multiplier effect couldn’t increase AD too … but then we got a crowding out ?? don’t we ?? I’d go for true B/ gov cut tax: Supply of labor up --> AD and AS both up I’d say false C/ [man !! where did u get that Q from !] gov multiplier effect being stronger then AD should increase

With B, doesnt a tax cut increase consumption, therefore increasing AD?

lloyd yes I think these econ Q can be viewed from different angles … (more chances to pick the wrong answer) any other ideas ?

When i look at the problem, im not sure what gov’t borrowing is. Does this mean a decrease in gov’t spending? who are the borrowing from?