Based on the Keynesian model, one reason to support government spending increases over tax cuts as measures to increase output is that:
A) government spending increases the MPC more than tax cuts.
B) the government-spending multiplier is larger than the tax multiplier.
C) government-spending increases do not lead to unplanned changes in inventories, but tax cuts do.
D) increases in government spending increase planned spending, but tax cuts reduce planned spending.

Question

Quizplus · Accepted Answer

According to the Keynesian model, government spending has a larger multiplier effect than tax cuts. This means that for every dollar increase in government spending, the increase in output is larger than for every dollar in tax cuts. Therefore, government spending increases are more effective in stimulating the economy and increasing output.

Based on the Keynesian Model, One Reason to Support Government