According to the Traditional Keynesian Analysis, If the Government Increases

question 129

Multiple Choice

According to the traditional Keynesian analysis, if the government increases spending by $20 million, then

• A) consumption will increase, and so total expenditures will increase by more than $20 million.
• B) consumption will decrease, and so total expenditures will increase by less than the $20 million.
• C) consumption will remain the same, and so total expenditures will increase by exactly $20 million.
• D) consumption will increase or decrease, and so total expenditures will increase or decrease depending on the change in consumption.

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Definitions:

Price Floor

A government- or authority-imposed minimum price that can be charged for a good or service, intended to prevent the market price from falling below a certain level.

Government

The system or group of people governing an organized community, often a state.

Sellers

Individuals or entities that offer goods or services in exchange for payment.

Price Ceiling

A legally imposed limit on how high a price can be charged for a product, service, or resource.