Government purchases of goods and services differ from changes in taxes and tran

Question

Government purchases of goods and services differ from changes in taxes and transfer payments because government purchases of goods and services:
A) is a type of fiscal policy while changes in taxes and transfer payments is a type of monetary policy.
B) is a type of monetary policy while changes in taxes and transfer payments is a type of fiscal policy.
C) influences aggregate demand directly while changes in taxes and transfer payments influence aggregate demand indirectly.
D) influences aggregate demand indirectly while changes in taxes and transfer payments influence aggregate demand directly.

Explanation / Answer

C) Taxes only influence indirectly because only a portion of the tax change is used to demand goods and services.

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