In the Keynesian model in the long run,a decrease in taxes causes the price level to ________ and the real interest rate to ________.
A)fall;rise
B)fall;fall
C)rise;rise
D)rise;fall

Question

Quizplus · Accepted Answer

In the Keynesian model, a decrease in taxes increases aggregate demand, leading to higher output and price levels in the long run. The increased demand for money due to higher output can lead to a rise in the real interest rate.

In the Keynesian Model in the Long Run,a Decrease in Taxes