In the basic Keynesian model,a $5 billion increase in autonomous planned investment leads to ________ in short-run equilibrium output.

Question

Quizplus · Accepted Answer

According to the basic Keynesian model, an increase in autonomous planned investment will lead to a multiplied increase in equilibrium output due to the multiplier effect. The actual increase in output will depend on the size of the multiplier, which is determined by the marginal propensity to consume and the marginal tax rate. Therefore, the increase in output will be more than the initial increase in investment.

In the Basic Keynesian Model,a $5 Billion Increase in Autonomous