Question
Assuming we are in a recession. The gov has high debt and is aiming for a a balanced budget, that is, G = T. How
Assuming we are in a recession. The gov has high debt and is aiming for a a balanced budget, that is, G = T.
How can the government achieve a fiscal stimulus effect on GDP whilst keeping the budget balanced?
Show how this is possible in a multiplier diagram.
How the government can achieve such a fiscal stimulus effect whilst keeping the budget balanced?
Derive the balanced budget multiplier using algebra. (Write down expressions for the change in GDP associated with a change in both G and T and set these equal to each other.)
I think this has already been answered but would love a deeper explanation so I can properly understand the working.
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