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Let's look at the Keynesian Cross and Keynesian multiplier in more detailfocusing on the multiplier effect. Assume government spending increases by 1,000. What happens? The
Let's look at the "Keynesian Cross" and Keynesian multiplier in more detailfocusing on the multiplier effect. Assume government spending increases by 1,000. What happens? The expenditure line shifts higher. Since the slope is less than one (because the slope is derived from MPC/marginal propensity to consume) our increase along the x-axis is greater than our increase along the y-axis. The increase in government spending has pushed both spending and income by an amount greater than the government spending. How can that be
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