The balanced budget multiplier is based on the point that the ________ multiplier is larger than the ________ multiplier so that an equal increase in government expenditure and taxes ________ aggregate demand.

Question

Quizplus · Accepted Answer

The balanced budget multiplier concept is based on the idea that the expenditure multiplier (which measures the effect of an increase in government spending on aggregate demand) is larger than the tax multiplier (which measures the effect of an increase in taxes on aggregate demand). Therefore, if the government increases both its expenditure and taxes by the same amount, the net effect is an increase in aggregate demand.

The Balanced Budget Multiplier Is Based on the Point That