Answer to Question #247710 in Macroeconomics for lavhe

Question

An increase in taxation in the Keynesian model with a government sector …

• A. increases the equilibrium level of income.
• B. reduces autonomous spending.
• C. increases the multiplier.
• D. reduces the multiplier.

Answer 1

B. reduces autonomous spending.

Increase in taxation increases the prices of products. This makes people to reduce spendings because of meeting their budgeting standards.