Planned expenditures including government = C + I + G
The multiplier for government spending = 1/(1-MPC)
Government programs affect households’ disposable personal income -income that ultimately flows back to households after subtraction from their income of any taxes paid and after addition to their income of any transfer payments they receive, such as Social Security, unemployment insurance, or welfare.
Consumption model with taxes → C = Ca + b(y-T)
Tax multiplier = -MPC/(1-MPC)
Economists call the multiplier for government spending and taxes the balanced-budget multiplier because equal changes in government spending and taxes will not unbalance the budget.