Question

g If government spending rises at the same time it reduces tax rates, then:Group of answer choicesbusiness investment will likely fall.crowding out will never occur.interest rates will never rise.business investment will likely rise.

Answer 1

Answer: business investment will likely rise.

Explanation:

When government expenditure increases, and there's also a tax cut which means a reduction in tax rates, that s will lead to more demand for goods and services in the economy as people will have more disposable income to spend. The increase in government expenditure can also bring about a reduction in unemployment.

Reduction on tax rates coupled with the increase in demand will also be beneficial to businesses as there will be more investment in the economy.