if government spending decreases by $10 billion and taxation decreases by $10 billion, there will be...

if government spending decreases by $10 billion and taxation decreases by $10 billion, there will be no change in equilibrium output and employment.

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The change in taxes and spending is equal and in the same direction which is called balanced budget policy and it has a multiplier of 1. It means the output also changes by the same amount. The output decreases by $10 billion and employment decreases as the output decreased.

Rahul Sunny answered 1 year ago

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