In the basic Keynesian model, a tax increase:
A)reduces short-run equilibrium output.
B)increases short-run equilibrium output.
C)reduces potential output.
D)increases potential output.

Name: In the basic Keynesian model, a tax increase: A)reduces short-run equilibrium output. B)increases short-run equilibrium output. C)reduces potential output. D)increases potential output.
Brand: Quizplus
Rating: 4.7 (36 reviews)

Question

Quizplus · Accepted Answer

A tax increase slows down the economy by decreasing consumption, which reduces short-run equilibrium output.

In the Basic Keynesian Model, a Tax Increase