A tax increase of $250 will exactly offset a $250 increase in government purchases,leaving aggregate demand unaffected.
When government spending increases by $250,the initial spending injection will be $250.The decrease in consumption due to a $250 tax increase will be less than $250; the remainder of taxpayer's payment will come from savings.Accordingly,the change in AD will be $250 when one uses the balanced budget multiplier.

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The Answer of A tax increase of $250 will exactly offset a $250 increase in government purchases,leaving aggregate demand unaffected.
When government spending increases by $250,the initial spending injection will be $250.The decrease in consumption due to a $250 tax increase will be less than $250; the remainder of taxpayer's payment will come from savings.Accordingly,the change in AD will be $250 when one uses the balanced budget multiplier.

A Tax Increase of $250 Will Exactly Offset a $250