Consider a closed economy where investment is constant and the marginal propensity to consume is 0.8. In that economy, the government decides to increase its expenditures. Why is the associated Keynesian multiplier greater than 1? Select one: a. Because the production increase leads to a revenue increase which leads to a demand increase which leads to a consumption increase which leads to further increases in production, demand and consumption b. Because the demand increase leads to a consumption increase which leads to a GDP increase which leads to a supply increase which leads to further increases in consumption, revenue and supply c. Because the demand increase leads to a supply increase which leads to a revenue increase which leads to a consumption increase which leads to further increases in demand, supply and GDP d. Because the production increase leads to a demand increase which leads to a supply increase which leads to a revenue increase which leads to further increases in demand, supply and GDP
Consider a closed economy where investment is constant and the marginal propensity to consume is 0.8. In that economy, the government decides to increase its expenditures.
Why is the associated Keynesian multiplier greater than 1?
Select one:
a. Because the production increase leads to a revenue increase which leads to a
b. Because the demand increase leads to a consumption increase which leads to a
c. Because the demand increase leads to a supply increase which leads to a revenue increase which leads to a consumption increase which leads to further increases in demand, supply and GDP
d. Because the production increase leads to a demand increase which leads to a supply increase which leads to a revenue increase which leads to further increases in demand, supply and GDP
Step by step
Solved in 2 steps
