Question

What is the value of balanced budget multiplier?

• A. Zero
• B. One
• C. Two
• D. None of these

Hint:

The balanced budget multiplier is always equal to one, meaning any change in government spending matched by an equal change in taxes results in a proportional increase in output.

Answer 1

The Correct Option is B

Step 1: Understanding the balanced budget multiplier.
The balanced budget multiplier refers to the economic concept that when a government increases its spending and taxes by the same amount, the overall effect on the economy is an increase in output by an amount equal to the change in government spending. The value of the balanced budget multiplier is always 1.

Step 2: Analyzing the options.
(A) Zero: This is incorrect because the balanced budget multiplier is not zero. It is equal to one.
(B) One: Correct. The balanced budget multiplier is one, meaning the change in output equals the change in government spending.
(C) Two: This is incorrect. The balanced budget multiplier is not two.
(D) None of these: This is incorrect, as the correct answer is (B) One.

Step 3: Conclusion.
The correct answer is (B) One, as the balanced budget multiplier is always equal to one.