The balanced budget theorem would suggest that the effect on the equilibrium level of income of an equal increase in government expenditure and in the exogeneous component of taxation would beGroup of answer choicessmaller than the increase in government expenditure if the marginal tax rate is zerozero because the expenditure and tax multipliers are the same absolute sizegreater than zero because the tax increase only indirectly affects aggregate expenditureboth the first and third alternatives above are correct.

Consider the Keynesian income-expenditure model with a government sector but no foreign sector. Assume that taxation is partly endogenous and dependent on the level of income. Suppose that the government increases its expenditure by $200 million and also increases the exogenous component of taxation by $200 million. Taking the budget balance as being equal to total taxes less government expenditure, which of the following statements is correct?Group of answer choicesThe equilibrium level of income will increase by less $200 million and the budget balance would improveThe equilibrium level of income will decrease but the budget balance would actually improveThe equilibrium level of income will increase by more than $200 million and the budget balance will be unchangedThe equilibrium level of income will increase by $200 million and the budget balance will be unchanged.

Suppose that the federal budget is balanced when GDP is at potential GDP. If equilibrium GDP falls below potential, please explain how and why government transfer payments would change; how and why tax receipts would change; how and why the budget would change.

Suppose that both government purchases and taxes increase by the same amount. The multiplier for this "balanced budget" increase in government purchases is:1 / (1 − MPC).1.−MPC / (1 − MPC).MPC2 / (1 − MPC).

Consider the following economy:(1) C = 1000 + 0.3 (Y - T)(2) I = 700(3) G = 500(4) T = 400The government decided to run a balanced budget. By how much would taxes have to increase or decrease? (

In the open-economy Keynesian income-expenditure model which includes a government sector with endogenous taxation, which of the following statements could apply to the process of adjustment towards an equilibrium?Group of answer choicesAn increase in government expenditure, without any changes in investment or exports must generate a matching change in the sum of saving, taxation and imports.An increase in investment by itself will generate a rise in saving, imports and taxation via changes in the level of income.An increase in injections would cause a matching increase in withdrawals because of the resulting change in the level of income occurring through the multiplier.All of the other statements are correct.