If the traditional Keynesian views turn out to be accurate, an increase in government spending would:
A) increase the price level.
B) decrease the level of investment.
C) increase the equilibrium level of real GDP.
D) decrease the level of consumption.
E) decrease the money supply.

Question

Quizplus · Accepted Answer

According to traditional Keynesian views, an increase in government spending would increase aggregate demand, leading to an increase in the equilibrium level of real GDP. This is because government spending would create more jobs and income, leading to an increase in consumption and investment. However, it may also lead to an increase in price level if the economy is already operating at full employment level. The other options are not necessarily true under traditional Keynesian views.

If the Traditional Keynesian Views Turn Out to Be Accurate