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If a balanced budget govenment passes a new fiscal stimulus or restraint , it can lead...

If a balanced budget govenment passes a new fiscal stimulus or restraint , it can lead to a deficit or surplus. in order to avoid an imbalance, how much of a tax hike or tax cut would be required. in the event of an extra $50 billion of government purchases, $30 billion of transfer payments, what should be the offsetting tax package?
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Answer #1

If the budget is balanced then the amount of government expenditure must equal tax revenue of the government.

In this case the government expenditure has increased by $80 billion (50+30) then to maintain a balanced budget, the tax revenues must also increase by $80 billion.  

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