In the Keynesian model with a fixed money wage but a flexible price level,an increase in taxes will lower
A)output and the price level,but leave the interest rate unchanged.
B)output,the price level and the interest rate.
C)output and the interest rate,but leave the price level unchanged.
D)output and the price level,but increase the interest rate.
E)the price level and the interest rate,but leave output unchanged.

Question

Quizplus · Accepted Answer

In the Keynesian model, an increase in taxes reduces aggregate demand, leading to lower output and a lower price level. The decrease in demand for money due to lower output also reduces the interest rate.

In the Keynesian Model with a Fixed Money Wage but a Flexible