Question

Which of the following statements is correct about the keynesian model with a government sector?
1)a decrease in interest rate will lead to a decrease in the equilibrium level of income.
2)an increase in consumption spending will lead to a decrease in investment spending.
3)an increase in the tax rate will lead to an increase in the equilibrium level of income.
4)an increase in the marginal propensity to save will lead to a decrease in the equilibrium level of income.

Answer 1

2)an increase in consumption spending will lead to a decrease in investment spending.