The Balanced Budget Multiplier Says That

question 43

Multiple Choice

The balanced budget multiplier says that

• A)An increase in government spending paid for by a tax cut of equal size has no effect on aggregate demand.
• B)An increase in government spending must be paid for by a tax cut of equal size.
• C)An increase in government spending paid for by a tax cut of equal size shifts aggregate demand rightward.
• D)An increase in government spending paid for by a tax cut of equal size shifts aggregate demand leftward.

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Definitions:

Nash Equilibrium

A concept in game theory where no participant can gain by unilaterally changing their strategy if the strategies of the others remain unchanged.

Gas Pump

A machine located at a service station that pumps liquid fuel like gasoline or diesel into a vehicle's tank.

Local Ordinance

Laws or regulations enacted by a local government authority that apply within its specific geographic area.

Price of Gasoline

The cost per unit volume of gasoline, influenced by various factors including crude oil prices, taxes, and demand.