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.

Question

Quizplus · Accepted Answer

A Keynesian macro model would include multiplier spending responses to describe the effect of a tax cut, as the model emphasizes the importance of fiscal policy in stimulating demand and boosting economic growth. This would involve analyzing how the tax cut would increase consumer and business spending, leading to additional rounds of spending as the increased demand filters through the economy. Labor supply and production responses may also be included in the model, but would be secondary to the overall impact on aggregate demand and spending. Interest rate rises would be more relevant in a classical macro model, which focuses on the role of monetary policy in controlling inflation and stabilizing the economy.

Which of the Following Would a Keynesian Macro Model Include