In the traditional Keynesian model, an increase in government spending raises total planned real expenditures by more than the original increase in government spending because
A)consumption spending depends negatively on real GDP.
B)consumption spending depends positively on real GDP.
C)consumption spending is not related to real GDP.
D)of the crowding-out effect on consumption spending.

Question

Quizplus · Accepted Answer

In the traditional Keynesian model, consumption spending is positively related to real GDP because as real GDP increases, households have more income to spend on consumption. Therefore, an increase in government spending, which increases real GDP, will also increase consumption spending because of this positive relationship.

In the Traditional Keynesian Model, an Increase in Government Spending