According to the Keynesian model, an increase in autonomous investment leads to
A) a more than proportional increase in real Gross Domestic Product (GDP).
B) a less than proportional increase in real Gross Domestic Product (GDP).
C) a proportional increase in real Gross Domestic Product (GDP).
D) a reduction in taxes, autonomous government spending, and a fall in real Gross Domestic Product (GDP).

Question

Quizplus · Accepted Answer

According to the Keynesian model, an increase in autonomous investment leads to a more than proportional increase in real GDP. This is because the initial increase in investment leads to an increase in income, which in turn leads to an increase in consumption and further rounds of investment, leading to a multiplier effect.

According to the Keynesian Model, an Increase in Autonomous Investment