In the Traditional Keynesian Model, an Increase in Government Spending

question 53

Multiple Choice

In the traditional Keynesian model, an increase in government spending

• A) causes the C + I + G + X line to shift upward by the full amount of the increase in government spending.
• B) causes the C + I + G + X line to shift upward by an amount less than the increase in government spending.
• C) causes the C + I + G + X line to shift upward by more than the increase in government spending.
• D) causes no change in the C + I + G + X line.

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Definitions:

Total Surplus

The sum of consumer surplus and producer surplus in a market, representing the total net benefit to society from trading a good or service.

Equilibrium Price

Equilibrium price is the market price where the quantity of goods supplied is equal to the quantity of goods demanded.

Willingness to Pay

The maximum amount an individual is prepared to spend on a good or service.

Pumpkin Market

A theoretical or real market where pumpkins are bought and sold, often used to illustrate principles of supply and demand or seasonal markets.