A local government plans to increase its spending on public infrastructure by $1 million while simultaneously increasing local taxes by $1 million. Based on the balanced budget multiplier concept, what is the likely impact on the local economy's output?

When a local government increases its spending and taxes by the same amount, the balanced budget multiplier concept suggests that the overall impact on the economy's output will be positive. This is because the government spending directly injects money into the economy, creating jobs and stimulating business activity. For example, if the government spends $1 million to build a new park, workers and suppliers will benefit from the project, leading to more spending in the community. Although the increase in taxes takes away some money from residents, the direct benefits from the spending often outweigh the negative effects of the taxes. Therefore, the local economy's output is likely to increase due to this government action.