In a Keynesian model,a temporary decrease in government purchases would cause output to ________ and the domestic real interest rate to ________.
A)not change;increase
B)not change;decrease
C)decrease;increase
D)decrease;decrease

Question

Quizplus · Accepted Answer

In a Keynesian model, a temporary decrease in government purchases reduces aggregate demand, leading to a decrease in output. This decrease in demand also leads to a decrease in the domestic real interest rate as the economy adjusts to lower spending.

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