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

Question

Quizplus · Accepted Answer

The balanced-budget multiplier remains constant regardless of the size of the MPC (marginal propensity to consume) because it is always equal to 1. This is because an equal increase in government spending and taxes will always have a net multiplier effect of 1, as the increase in spending directly offsets the decrease in consumption due to higher taxes.

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