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.

Expert Solution

False

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 2 years ago

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please be able to discuss government spending, taxation and borrowing

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