Assume you have a recessionary gap in your economy and you are the senior economic policy advisor for the government. Currently the government is using a balanced budget fiscal policy and you have been asked the following question. Will the effect of a $1,000 increase in government spending have the same effect as a $1,000 decrease in taxes? Assume a multiplier of 2.75 and an MPC = 0.70.

Calculate the effects of both economic policy choices.