In the monetarist model,an increase in both government spending and taxes would
A)lead to a large increase in interest rates.
B)increase income dollar for dollar with the increase in government spending.
C)have a much smaller impact on income than in the Keynesian model.
D)all of the above.

Question

Quizplus · Accepted Answer

In the monetarist model, changes in government spending and taxes have a much smaller impact on income compared to the Keynesian model. This is because they believe that changes in money supply have a greater effect on the economy than changes in government spending and taxes. Additionally, an increase in both government spending and taxes would not necessarily lead to a large increase in interest rates as there are many other factors that influence interest rates in the economy. The statement that an increase in government spending would increase income dollar for dollar is also not necessarily true within the monetarist framework.

In the Monetarist Model,an Increase in Both Government Spending and Taxes