All of the following items shrink the expenditure multiplier in the Keynesian-cross model except:
A) savings.
B) imports.
C) transfers,such as Canada Pension Plan receipts.
D) taxes.

Question

Quizplus · Accepted Answer

Transfers, such as Canada Pension Plan receipts, do not directly affect aggregate demand and therefore do not have a negative impact on the expenditure multiplier. A decrease in savings, an increase in imports, or an increase in taxes would all shrink the expenditure multiplier by reducing the amount of money available for consumption and investment.

All of the Following Items Shrink the Expenditure Multiplier in the Keynesian-Cross