In the Keynesian-Cross Analysis, Assume That the Analysis of Taxes

question 9

Multiple Choice

In the Keynesian-cross analysis, assume that the analysis of taxes is changed so that taxes, T, are made a function of income, as in T = T + tY, where T and t are parameters of the tax
Code and t is positive but less than 1. As compared to a case where t is zero, the multiplier for government purchases in this case will:

• A)not change.
• B)be smaller.
• C)be bigger.
• D)be equal to 1.

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