The fraction of an increase in income that is saved is referred to as the _____

In the Keynesian model, an increase in government purchases affects output by

A) increasing labor supply, because workers feel effectively poorer. B) increasing saving to pay for future taxes, lowering the real interest rate and shifting the IS curve to the left. C) increasing the real interest rate due to crowding out, reducing aggregate demand. D) increasing aggregate demand as national saving declines.

If marginal cost is less than marginal revenue, a firm should

a. expand output. b. contract output. c. maintain steady output. d. shut down.