In the short-run Keynesian model, to close a recessionary gap of $1 billion dollars government purchases must be:
A)increased by $1 billion.
B)decreased by $1 billion.
C)increased by more than $1 billion.
D)increased by less than $1 billion.

Question

Quizplus · Accepted Answer

Due to the income-expenditure multiplier, a short-run recessionary gap of $1 billion can be closed with new government purchases of less than $1 billion.

In the Short-Run Keynesian Model, to Close a Recessionary Gap