In a Keynesian model,a temporary increase in government purchases would cause output to ________ and the domestic real interest rate to ________,in the short run.
A)remain unchanged; increase
B)remain unchanged; decrease
C)increase; increase
D)increase; decrease

Question

Quizplus · Accepted Answer

In a Keynesian model, a temporary increase in government purchases would increase aggregate demand, leading to an increase in output. This increase in demand for funds for government spending would also lead to an increase in the domestic real interest rate in the short run.

In a Keynesian Model,a Temporary Increase in Government Purchases Would