In the traditional Keynesian model, a decrease in government spending lowers total planned real expenditures by more than the original decrease in government spending because

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Quizplus · Accepted Answer

According to the traditional Keynesian model, consumption spending depends positively on real GDP. This means that a decrease in government spending will lower total planned real expenditures by more than the original decrease in government spending because it will cause a decrease in real GDP, which will in turn decrease consumption spending. This multiplier effect is a key feature of the Keynesian model.

In the Traditional Keynesian Model, a Decrease in Government Spending