The 'Balanced Budget Multiplier' theorem states that if the government simultaneously increases its spending and raises taxes by the exact same amount, the net impact on the national income will be zero.

Answer: False

The Balanced Budget Multiplier is actually equal to 1. This means that if the government raises taxes by $100 and spends exactly $100, the national income will still increase by $100. This happens because the full $100 of government spending enters the economy directly, whereas the $100 tax hike only reduces consumption by a fraction of that amount (since part of the tax would have been saved anyway).