The Traditional Keynesian Approach Concludes That an Increase in Government

question 175

Multiple Choice

The traditional Keynesian approach concludes that an increase in government spending

• A) generates a greater increase in investment spending.
• B) generates an equal increase in total spending because government spending makes up part of total spending.
• C) generates a greater increase in total spending because consumption spending increases as incomes increase.
• D) has no effect on total spending because consumers increase saving by an equal amount.

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Definitions:

Marginal Product

The additional output resulting from the use of one more unit of a production input, holding other inputs constant.

Labor

The human effort, including physical and mental skills, employed in the production of goods and services within an economy.

Demand

The desire accompanied by the ability to pay for goods or services, determining the quantity that will be bought at a given price level.

Marginal Revenue Product

The additional revenue generated from the sale of one more unit of a good or service produced as the result of one more unit of an input.