If the spending multiplier is 5, a $1 increase in goverment spending and $1 increase in taxes, what is true?. GDP will increase by $1 The government will have a balanced budget because it will spend $1, exactly the amount is collecting in revenue through an increase in tax. $1 increase in government spending will lead to $5 increase in GDP, but at the same time, $1 increase in taxes will lead to $4 decrease in GDP (tax multiplier is -4 while spending multiplier is 5). All of the above