A Simultaneous Increase of Government Purchases by $50 Billion and a Tax

True/False

A simultaneous increase of government purchases by $50 billion and a tax hike of $50 billion should stimulate the economy by $50 billion.
The balanced budget multiplier is equal to 1.In this case,a $50 billion increase in annual government expenditure combined with an equivalent increase in taxes increases aggregate demand by $50 billion per year.When government spending increases by $50 billion,the initial spending injection will $50 billion; the remainder of taxpayers' payments will come from savings.Accordingly,the increase in AD will be $50 billion when one uses the balanced budget multiplier.