Based on the Keynesian Model, One Reason to Support Government

question 45

Multiple Choice

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.

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Definitions:

Peak Season

The time of year when demand for services or goods is highest, often leading to increased business activity.

Collaboration

Working together cooperatively among businesses or entities towards a common goal or project, often enhancing performance or outcomes.

Inventory

The total amount of goods and materials held by a company for the purpose of resale or production.

Production Stable

A situation in manufacturing where the production process is consistent, reliable, and capable of meeting expected demand without significant fluctuations.