With keeping tax rate (T) constant if government purchases (G) increase, then arrange the following statement considering the effect on total income and output.

(A) Rise in Plan Aggregate expenditure.
(B) Government runs a deficit when G exceeds T.
(C) Equilibrium income level increased.
(D) Aggregate demand schedule shifts upward.

Choose the correct answer from the options given below:

(B), (A), (D), (C)

The correct answer is Option (1) → (B), (A), (D), (C)

• (B) Government runs a deficit when G exceeds T. The initial policy action of increasing government purchases (G) while keeping taxes (T) constant immediately creates a budget deficit if G is greater than T. This is the fiscal outcome of the decision.

• (A) Rise in Planned Aggregate expenditure. Government purchases (G) are a component of planned aggregate expenditure (AE = C + I + G + NX). Therefore, an increase in G directly and immediately increases the total planned spending in the economy.

• (D) Aggregate demand schedule shifts upward. The increase in planned aggregate expenditure (A) translates directly into an upward shift of the aggregate demand (AD) schedule. This represents a higher level of demand at every price level.

• (C) Equilibrium income level increased. The upward shift in the aggregate demand curve creates a new equilibrium where the total output (income) is higher. This happens through the multiplier effect, where the initial increase in G leads to more income, which in turn leads to more consumption, and so on, until a new, higher equilibrium is reached.