Sector Balances after Period 2

• Answer: government's balance is 0; private sector's balance is 0

• No increase in private sector's net financial assets

              Government                      Non-government

        \                    /            \                    /
         \                  /  Spend: 100  \                  /
          \     $   0      /   --------->   \     $   0      /
           \              /    Tax:   100    \              /
            \            /     <---------     \            /
             \__________/                      \__________/

                $   0               +             $   0           ≡   0

• The sector balances sum to 0