Question

In the Keynesian-cross model, fiscal policy has a multiplied effect on income because fiscal policy: changes income, which changes consumption, which further changes income. is government spending and, therefore, more powerful than private spending. changes the interest rate. increases the amount of money in the economy.

Answer 1

Changes income, which changes consumption, which further changes income

Step-by-step explanation:

Fiscal policy is an effective technique to control savings, income and consumptions because of its multiplier effect. The first effect of fiscal policy is that it changes income and that change in income leads to a change in consumption because of purchasing power; likewise, due to the change in consumption income changes. So, fiscal policy has a multiplier effect.