In a simple Keynesian model of closed economy without taxes, if the marginal propensity to save is 0·3, an increase in government expenditure by ₹ 1,000 crore will result in an approximate increase in a country's income by
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Keynesian cross and the multiplier has come up 167 times in 7 exams since 2006.
This question is on Government spending and tax multipliers, part of Keynesian cross and the multiplier in Macroeconomics.
The effect on income of changes in government spending, lump-sum taxes, transfers and income taxes.
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Question from the JNU SSS 2016 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.