Assuming that marginal propensity to consume is not zero, and that the balanced budget multiplier is positive, a decrease in lump-sum personal income taxes will most likely result in an increase in real GDP because which of the following must occur? I

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Assuming that marginal propensity to consume is not zero, and that the balanced budget multiplier is positive, a decrease in lump-sum personal income taxes will most likely result in an increase in real GDP because which of the following must occur?

I. Government spending decreases to maintain a balanced budget.

II. Consumption spending increases because disposable personal income increases

III. Investment spending decreases because disposable personal income increases

I only

III only

II only

I and III only