Answer to Question #320925 in Macroeconomics for pHATHU

Question

THE GOVERNMENT REFERRED TO IN THE PREVIOUS QUESTION APPROACHES YOU FOR ADVICE ABOUT HOW TO INCREASE THE SIZE OF THE KEYNESIAN MULTIPLIER.

Answer 1

The Keynesian multiplier is an economic theory that states; the more the government's expenditure the more the economy flourishes. The theory also states that the registered net effect is greater than what the government spends. The Keynesian multiplier theory allows the government to curb deficits and save in case of an economic down-cycle. It is also useful in restraining the government when there is rapid economic growth. To increase the Keynesian multiplier effect, the government should raise input in its gross, investment, and private consumption expenditure. As a result, this will increase the level of output.