Answer to Question #332171 in Macroeconomics for KGAO

Question

In the Keynesian model, tax revenue…

a. does not appear in the aggregate expenditure function because it is always equal to government expenditure.

b. is taken into account through its effect on consumption.

c. reduces equilibrium income because it reduces autonomous spending.

d. increases aggregate expenditure because government invariably increases its spending when taxes rise.

e. is taken to be fixed because government expenditure is taken to be fixed.

Answer 1

c. reduces equilibrium income because it reduces autonomous spending.