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Viewed through the lens of the augmented IS-MP-AS-AD model, increases in autonomous government expenditures lead to large increases in output when... a. the MP curve

Viewed through the lens of the augmented IS-MP-AS-AD model, increases in autonomous government expenditures lead to large increases in output when...

a. the MP curve is nearly vertical (due to a very large value of y).

b. expectations of inflation rates are always equal to realized inflation rates.

c. the private sector reduces autonomous consumption expenditures by an equal amount because they believe that tax revenues will eventually be raised in order to finance current increases in government expenditures.

d. the Keynesian multiplier is large.

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