In a closed economy with fixed or autonomous (non-income dependent)taxes,the balanced budget government purchases multiplier is negative.

Question

Quizplus · Accepted Answer

In a closed economy with fixed or autonomous taxes, the balanced budget government purchases multiplier is positive because an increase in government spending (matched by an equal increase in taxes to maintain a balanced budget) leads to an increase in aggregate demand, which in turn increases output and income.

In a Closed Economy with Fixed or Autonomous (Non-Income Dependent)taxes,the