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Government raises spending by Rs 250 crore and taxes by Rs 250 crore. Income rises by
ARs 500 crore
BRs 125 crore
CRs 750 crore
DRs 250 crore
Answer & Solution
Correct answer: D. Rs 250 crore
The balanced budget multiplier equals one, so income increases by the same Rs 250 crore as the spending.
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