Question

According to the Keynesian-cross analysis, when there is a shift upward in the government-purchases schedule by an amount ΔG and the planned expenditure schedule increases by an equal amount, the equilibrium income rises by:

ΔG x 1/(1-MPC)

ΔG x 1/(1+MPC)

One unit

ΔG

Answer 1

Ans) the correct option is a) ΔG x 1/(1-MPC)

Change in income = Change in government expenditure * 1/(1-MPC)