The order for the chain of events for the Keynesian model is for a change in ________ to lead to a change in ________,which is then multiplied resulting in a change in ________.
A) investment; animal spirits; the price level
B) business confidence; investment; real GDP
C) the Fed's intermediate targets; the Fed's goals; real GDP
D) real GDP; income; consumption

Question

Quizplus · Accepted Answer

The Keynesian model focuses on the relationship between investment and income. Therefore, a change in business confidence (which affects investment) leads to a change in investment, which is then multiplied through the multiplier effect, resulting in a change in real GDP. Option A is incorrect because animal spirits are not an explicit part of the Keynesian model. Option C is incorrect because it refers to the Fed's goals, which are not relevant to the Keynesian model. Option D is incorrect because it describes the circular flow of income, which is not the focus of the Keynesian model.

The Order for the Chain of Events for the Keynesian