If the government wants to increase equilibrium income by $150 billion but does not want to change the size of the deficit, it should
A)increase G and decrease T by $150 billion
B)increase G and T by $150 billion
C)decrease G and T by $150 billion
D)decrease C and increase T by $150 billion
E)We cannot answer the question without knowing the MPC.

Question

Quizplus · Accepted Answer

Increasing both government spending (G) and taxes (T) by the same amount will increase equilibrium income without changing the deficit, as the initial increase in G directly raises aggregate demand, while the increase in T offsets the deficit impact.

If the Government Wants to Increase Equilibrium Income by $150