In a closed economy with unutilised capacity, if the investment rate remains unchanged and savings amount to 20 percent of GDP, an increase in the government's fiscal deficit by 100 units will cause economic activity to increase 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 2017 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.