Assume a closed economy: Y=C+I+G In the Keynesian Cross model, as in the slides, assuming the marginal propensity to consume, c1, is less than one, which FOUR of the following statements are correct? Select one or more: A. The government sends cheques to all taxpayers, worth a total of £1 billion. As long as at least some of this results in higher autonomous consumption, GDP will rise by more than £1 billion. B. A rise in government spending on benefits or other transfers will increase Y by more than the increase in benefits C. If the c1 = 0.75 the multiplier will be 4 D. A fall in autonomous consumption will reduce Y by more than the initial fall E. The government sends cheques to all taxpayers, worth a total of £1billion. As a result, autonomous consumption increases by £0.5 billion. As long as c1 > 0.5, GDP will rise by more than £1 billion F. If consumers seek to save more by reducing their autonomous consumption, c0, this will reduce output.
Assume a closed economy: Y=C+I+G
In the Keynesian Cross model, as in the slides, assuming the marginal propensity to consume, c1, is less than one, which FOUR of the following statements are correct?
Select one or more:
The government sends cheques to all taxpayers, worth a total of £1 billion. As long as at least some of this results in higher autonomous consumption, GDP will rise by more than £1 billion.
A rise in government spending on benefits or other transfers will increase Y by more than the increase in benefits
If the c1 = 0.75 the multiplier will be 4
A fall in autonomous consumption will reduce Y by more than the initial fall
The government sends cheques to all taxpayers, worth a total of £1billion. As a result, autonomous consumption increases by £0.5 billion. As long as c1 > 0.5, GDP will rise by more than £1 billion
If consumers seek to save more by reducing their autonomous consumption, c0, this will reduce output.
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