The Simple Keynesian Model

Multiple Choice

The simple Keynesian model

A) overstated the effect of an increase in government spending by neglecting the necessary increase in the interest rate and consequent decline in investment that accompany an increase in government spending.
B) understated the effect of an increase in government spending by neglecting the necessary increase in the interest rate and consequent decline in investment that accompany an increase in government spending.
C) overstated the effect of an increase in government spending by neglecting the necessary decrease in the interest rate and consequent increase in investment that accompany a decrease in government spending.
D) understated the effect of an increase in government spending by neglecting the necessary decrease in the interest rate and consequent decrease in investment that accompany an increase in government spending.