The balanced budget multiplier is always equal to:
A) 0.5.
B) 0.75.
C)1.
D) 1.5.

Question

Quizplus · Accepted Answer

The balanced budget multiplier is the increase in equilibrium output resulting from a simultaneous increase in government spending and taxation such that the budget deficit stays constant. In this scenario, the increase in government spending and taxation has an equal effect on aggregate demand. Thus, the balanced budget multiplier will always be equal to 1.

The Balanced Budget Multiplier Is Always Equal To