Which of the following would a Keynesian macro model include to describe the effect of a tax cut?
A)Labor supply and production responses.
B)Interest rate rises.
C)Multiplier spending responses.
D)A positive relationship between interest rates and investment.

Question

Quizplus · Accepted Answer

Keynesian macroeconomic models include the concept of a multiplier effect, where a change in government spending or taxation results in a larger change in national income or output. In the case of a tax cut, the model would consider the effect of the tax cut on consumer spending (increased disposable income) and the resulting impact on aggregate demand, output, and employment. The model would also consider how the multiplier effect would apply to the tax cut, potentially amplifying its impact on the economy. Labor supply and production responses may be part of the model, but they are not specific to the effect of a tax cut. Interest rate rises and a positive relationship between interest rates and investment may be relevant in other contexts, but are not directly related to the impact of a tax cut.

Which of the Following Would a Keynesian Macro Model Include