Answer to Question #154312 in Macroeconomics for Madu

Question

1. In the simple Keynesian model, an increase of one dollar in autonomous expenditure will 

cause equilibrium income to increase by a multiple of this one dollar increase. Explain the 

process by which this happens using different approached of explanations.. 

Answer 1

The Keynesian Multiplier is an economic theory that asserts that an increase in private consumption expenditure, investment expenditure, or net government spending (gross government spending – government tax revenue) raises the total Gross Domestic Product (GDP).