Economics · Balanced Budget Multiplier Principle

Given below are two statements: one is labelled as Assertion (A) and the other as Reason (R). Assertion (A): In a simple Keynesian model with lump-sum taxes, an equal increase in government expenditure and taxes increases equilibrium national income by the exact amount of the increase in government spending. Reason (R): The government spending multiplier is 11 − MPC and the lump-sum tax multiplier is −MPC1 − MPC; adding them yields a balanced budget multiplier of 1. In light of the above statements, choose the correct answer: