Other things equal, in a Keynesian income model with a foreign sector, the autonomous spending multiplier that applies to an autonomous increase in the country's investment __________.

Question

Quizplus · Accepted Answer

When foreign repercussions are included in a Keynesian income model, the autonomous spending multiplier that applies to an autonomous increase in the country's investment is larger than when such repercussions are not included in the model. This is because the inclusion of foreign repercussions allows for the possibility of exports increasing as a result of the increase in investment, which in turn leads to a larger increase in aggregate demand and a larger multiplier effect.

Other Things Equal, in a Keynesian Income Model with a Foreign