Question

What is the balanced-budget multiplier? Explain why the balanced-budget multiplier is always equal to 1?

What is the balanced-budget multiplier? Explain why the balanced-budget multiplier is always equal to 1?

Homework Answers

Answer #1
  • Balanced budget multiplier refers to the changes in production due to the government imposed taxes and purchases.
  • It is actually the sum of expenditure multiplier and the tax multiplier or the ratio of the change in GDP to a change in government spending which is equal to the change in taxes.
  • The balanced budget multiplier is always equal to one as the multiplier effect caused by the changes in taxes offsets everything excluding the purchase of aggregate production made by the initial injection.
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
What is the balanced-budget multiplier?
What is the balanced-budget multiplier?
“The balance budget multiplier is equal to zero”. Is this statement correct or incorrect? Define the...
“The balance budget multiplier is equal to zero”. Is this statement correct or incorrect? Define the balanced budget multiplier and then explain your answer.
The balanced budget multiplier is Select one: a. equal to zero. b. positive because the magnitude...
The balanced budget multiplier is Select one: a. equal to zero. b. positive because the magnitude of government expenditure multiplier is smaller than the magnitude of tax multiplier. c. negative because the magnitude of the tax multiplier is larger than the magnitude of the government expenditure multiplier. d. positive because the magnitude of government expenditure multiplier is larger than the magnitude of tax multiplier. e. negative because the magnitude of government expenditure multiplier is larger than the magnitude of the...
Should the federal budget always be balanced? If yes, why yes? If no, why no? with...
Should the federal budget always be balanced? If yes, why yes? If no, why no? with the online sources
4. The balanced budget multiplier For both political and macroeconomic reasons, governments are often reluctant to...
4. The balanced budget multiplier For both political and macroeconomic reasons, governments are often reluctant to run budget deficits. Here, we examine whether policy changes in G and T that maintain a balanced budget are macroeconomically neutral. Put another way, we examine whether it is possible to affect output through changes in G and T so that the government budget remains balanced. a. By how much does Y increase when G increases by one unit? b. By how much does...
According to the balanced budget multiplier, an increase in government spending of $10,000 that is financed...
According to the balanced budget multiplier, an increase in government spending of $10,000 that is financed by an increase of $10,000 in taxes will have what effect on the economy when MPC is 0.80? a) Income will not change. b) Income will increase by $8,000. c) Income will increase by $50,000. d) Income will increase by $10,000.
What is and How do you find the Government-Purchases Multiplier? What is and How do You...
What is and How do you find the Government-Purchases Multiplier? What is and How do You find the Balanced-Budget Government-Purchases Multiplier? What is and how do you find the Tax Multiplier? Explain why G and T have different multipliers.
Explain why balancing the federal budget may not always make the economy stronger.
Explain why balancing the federal budget may not always make the economy stronger.
what is balanced budget ?
what is balanced budget ?
1. Define what the multiplier is AND explain how and why it works. 2. Name some...
1. Define what the multiplier is AND explain how and why it works. 2. Name some government policies that could cause aggregate demand to shift.