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:

The correct option is (A), (B), (D), (C).

Let us analyze the step-by-step macroeconomic transmission mechanism when the government purchases ($G$) increase while keeping the tax rate ($T$) constant:

Step 1: Increase in Planned Aggregate Expenditure (A)
Planned aggregate expenditure is given by the formula:
$E=C+I+G+NX$
When government purchases ($G$) increase, it directly increases the planned aggregate expenditure at any given level of income. Hence, the first event in the sequence is a Rise in Planned Aggregate expenditure (A).

Step 2: Impact on Government Budget (B)
Since the tax rate ($T$) is kept constant, the government's tax revenue does not immediately change. With government spending ($G$) rising and exceeding the tax revenue ($T$), the government budget moves towards a deficit. Thus, the next logical statement is that the Government runs a deficit when G exceeds T (B).

Step 3: Shift in the Aggregate Demand Schedule (D)
The increase in autonomous government spending shifts the entire planned expenditure / aggregate demand schedule upward in the Keynesian cross diagram. Therefore, the Aggregate demand schedule shifts upward (D).

Step 4: Increase in Equilibrium Income (C)
The upward shift in the aggregate demand schedule leads to an adjustment process where inventories fall, prompting firms to increase production. Through the multiplier effect, this leads to a new equilibrium at a higher level of national income and output. Thus, the final step in the sequence is that the Equilibrium income level increased (C).

Combining these steps in logical chronological order gives the sequence: (A) → (B) → (D) → (C).