Arrange the following steps in the correct order to understand the effect of a balanced budget increase on the economy: A) Government increases spending and taxes by the same amount; B) Aggregate demand is stimulated; C) Real output increases; D) Economic growth is achieved.

To understand how a balanced budget increase affects the economy, we start with step A, where the government increases both spending and taxes by the same amount. This action leads to step B, where aggregate demand is stimulated because the government spending injects money into the economy, encouraging people and businesses to spend more. As demand grows, we move to step C, where real output increases because businesses respond to higher demand by producing more goods and services. Finally, this chain of events can lead to step D, where economic growth is achieved as overall production and income levels rise. For example, if the government spends $100 million on infrastructure while also raising taxes by $100 million, the increased spending can create jobs and boost local economies, resulting in a stronger economy overall.