If government increases taxes by the same amount it increases ...

[Diane]

If government increases taxes by the same amount it increases government spending, there will be no effect on aggregate demand: the increase in government spending is offset by an equal decrease in consumption spending by households.
 
  Indicate whether the statement is true or false

Question 2

Suppose you withdraw 1,000 in cash from your checking account. Draw a T-account to show the effect of this transaction on your bank's balance sheet.
 
  What will be an ideal response?

[xMRAZ]

Answer to Question 1

FALSE

Answer to Question 2

The withdrawal of 1,000 from your checking account will reduce the bank's checking account deposits and reserves by 1,000.

Assets Liabilities
Reserves -1,000 Deposits -1,000

[Diane]

Excellent

[Dominic]

TYSM