In the Keynesian cross model, if taxes rise the same amount as government spending, the equilibrium output falls.

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Quizplus · Accepted Answer

In the Keynesian cross model, if taxes rise by the same amount as government spending, the equilibrium output actually increases or remains unchanged but does not fall. This is because government spending has a direct impact on aggregate demand, while the effect of a tax increase is indirect and depends on the marginal propensity to consume.

In the Keynesian Cross Model, If Taxes Rise the Same