Which of the following is NOT a simplifying assumption in the simple Keynesian model?
A) Net investment and gross investment are equal.
B) All profits are distributed to the business owners.
C) Real disposable income equals government purchases of goods and services.
D) There is no foreign trade.

Question

Quizplus · Accepted Answer

In the simple Keynesian model, the assumption that real disposable income equals government purchases of goods and services (C) is not made. The model typically assumes fixed levels of investment, no foreign trade, and that profits may or may not be fully distributed, but it does not equate disposable income directly with government spending.

Which of the Following Is NOT a Simplifying Assumption in the Simple