When considering a change in government spending in the traditional Keynesian model , which of the...
When considering a change in government spending in the traditional Keynesian model , which of the following expenditures is considered an offset to government spending? A. Investment. B. Net exports. C. Consumption. D. None of these above are considered offsets.
Homework Answers
Correct option is D. None of these above are considered offsets.
When considering a change in government spending in the traditional Keynesian model , none of these would be considered an offset to government spending. Taxes would serve as an offset. It is so because government spending directly increases the aggregate expenditure whereas when taxes are increased then aggregate expenditure is reduced indirectly because taxes affect the consumer's disposable income.
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