In the Keynesian cross model, if the government lowers taxes, then ___ rises.
A) consumption
B) disposable income
C) equilibrium output
D) all of the above

Question

Quizplus · Accepted Answer

Lowering taxes increases disposable income, which in turn increases consumption. This increase in consumption shifts the aggregate demand curve to the right, leading to a higher equilibrium output.

In the Keynesian Cross Model, If the Government Lowers Taxes