Answer to Question #214108 in Economics for Paballo

Question

Which one of the following is correct about government spending in the Keynesian model?

[1] Government spending affect the size of the multiplier.

[2] Government spending decreases aggregate spending in the economy.

[3] A decrease in repo rate discourage social spending by government.

[4] Government spending has an effect on the income level in the economy.

Use the figure below to answer question 3.12.

3.12 The movement from A to A’’ can result from …

[1] an increase in government spending.

[2] a decrease in government spending.

[3] an increase in taxes.

[4] a decrease in taxes.

Answer 1

[1] Government spending affects the size of the multiplier.

[2] a decrease in government spending.