Question

In the Keynesian-cross model, if taxes are reduced by 100, then planned expenditures ______ for any given level of income.

a. increase by 100
b. increase but by less than 100
c. decrease by 100
d. increase by more than 100

Answer 1

d. increase by more than 100

Step-by-step explanation:

there is an inverse relationship between taxes and planned expenditure and due to the multiplier effect, expenditure increases by more than a decrease in tax value.