In a simple Keynesian model,an increase in government spending,other things being equal
A) increases the equilibrium GDP by a multiplier effect.
B) alters the composition of, but not the total amount of, intended spending.
C) shifts the C + I + G line downward.
D) pushes the aggregate demand curve to the left, causing price levels to fall.
E) changes the angle of the 45-degree line.

Question

Quizplus · Accepted Answer

In a simple Keynesian model, an increase in government spending will increase autonomous spending, leading to a multiplied increase in equilibrium GDP. This is known as the income-expenditure multiplier effect. Therefore, choice A is the most appropriate answer.

In a Simple Keynesian Model,an Increase in Government Spending,other Things