Below is some data for a hypothetical economy:

-Refer to the information above to answer this question.If government increased both its spending and taxes by $60,what would be the new equilibrium income?
A)$1,210
B)$1,050
C)$823.33
D)$1,070
E)$1,090

Question

Below is some data for a hypothetical economy:
 
-Refer to the information above to answer this question.If government increased both its spending and taxes by $60,what would be the new equilibrium income?
A)$1,210 
B)$1,050 
C)$823.33 
D)$1,070 
E)$1,090

Quizplus · Accepted Answer

An increase in government spending and taxes by the same amount leads to a change in equilibrium income equal to the change in government spending, due to the balanced budget multiplier effect. If the initial equilibrium income was $1,030, adding $60 results in a new equilibrium income of $1,090.

Below Is Some Data for a Hypothetical Economy