If the government increases spending and maintains a balanced budget at the same time:

A) There will be no effect on the economy, since taxes balance government spending.
B) Income will actually decrease by the amount that taxes have to be increased to offset the effects of the government spending.
C) Income will increases through the multiplier effect by more than the increase in government spending.
D)  Income will increase by the amount of the increase in government spending.

ANSWER:

D)  Income will increase by the amount of the increase in government spending.