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4. Balance budget multiplier For both political and macroeconomic reasons, governments are often reluc- tant to tun budget decits. Here, we examine whether policy changes in G and T that maintain a balanced budget are macroeconomically neutral. Put another way, we examine whether it is possible to affect output through changes in G and T so that the government budget remains balanced. Start from equation 1 Y: 161 [m+f+Gq a. By how much does Y increase when G increases by 1 unit? b. By how much does Y decrease when T increases by 1 unit? c. Why are your answers to parts a and b different? Suppose the economy starts with a balances budget G = T. If the increase in G is equal to the increase in T, then the budget remains in balance. Let us now compute the balanced budget multiplier. d. Suppose that G and T increase by one unit each. Using your answers to parts a and b, what is the change in equilibrium GDP? Are balanced budget changes in G and T macroeconomically neutral? c. How does the specic value of the propensity to consume affect your answer to part d.? Tlthy?\