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Question
In the traditional Keynesian model, if the government increases spending, then
A) consumption will increase, and so real Gross Domestic Product (GDP) will increase by more than the increase in government spending.
B) consumption will decrease, and so real Gross Domestic Product (GDP) will increase by less than the increase in government spending.
C) consumption will remain the same, and so real Gross Domestic Product (GDP) will increase by the same amount of the increase in government spending.
D) consumption will increase or decrease, and so real Gross Domestic Product (GDP) will increase or decrease depending on the change in consumption.
Answer
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