According to the traditional Keynesian analysis, if the government increases spending by $10 million, then
A) consumption will increase, and so total expenditures will increase by more than $10 million.
B) consumption will decrease, and so total expenditures will increase by less than the $10 million.
C) consumption will remain the same, and so total expenditures will increase by exactly $10 million.
D) consumption will increase or decrease, and so total expenditures will increase or decrease depending on the change in consumption.
Answer: A) consumption will increase, and so total expenditures will increase by more than $10 million.
You might also like to view...
Rice consumption per capita in China is falling while income per capita is rising, other things being equal. This means that
A. rice demand is price inelastic. B. rice has many substitutes. C. rice is an inferior good. D. None of the above.
Which of the following is classified as an asset for a commercial bank customer?
A) A car loan B) A commercial loan C) Demand deposits D) Deposits with the Federal Reserve