As the size of the MPC increases, the value of the balanced-budget multiplier

Question

Quizplus · Accepted Answer

The balanced-budget multiplier remains constant regardless of the size of the marginal propensity to consume (MPC) because it is always equal to 1. This is because an increase in government spending (which injects money into the economy) is exactly offset by an increase in taxes (which withdraws the same amount of money from the economy), leading to a net multiplier effect of 1.

As the Size of the MPC Increases, the Value of the Balanced-Budget