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goods and services, transfer payments and …

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goods and services, transfer payments and repayment of debts. Taxation is a compulsory contribution made by the people to the government against which no direct payment are made by the government. A taxpayer becomes poor by the amount of taxes. Hence the income available in the hands of the people is reduced by the amount of taxes paid. Public borrowing is made through the sales of new government bonds, which people voluntarily purchased. Neither their income nor their wealth is reduced thereby. They simply alter the form and composition of wealth in the private sector. An increase in the net indebtedness of the government to the central bank takes place through the creation of new money by the central bank. If government increases its expenditure on infrastructural development project, how will this impact the aggregate demand?
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