The result of the balanced budget multiplier is that aggregate demand changes by the amount of the change in:
A)government spending.
B)tax revenue.
C)government spending plus tax revenue.
D)government spending minus tax revenue.

Question

Quizplus · Accepted Answer

The balanced budget multiplier states that a change in government spending will lead to an equal change in aggregate demand. This is because the increase in government spending will increase disposable income, which will lead to an increase in consumption spending. The increase in consumption spending will then lead to an increase in aggregate demand.

The Result of the Balanced Budget Multiplier Is That Aggregate