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If Government Increases Spending and Wants to Maintain a Balanced

Question 109

Multiple Choice

If government increases spending and wants to maintain a balanced budget, it should


A) decrease taxes by an equal amount.
B) increase taxes by an equal amount.
C) decrease taxes by an amount equal to the increase in spending multiplied by the tax multiplier.
D) increase taxes by an amount equal to the increase in spending multiplied by the tax multiplier.

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