he impact of government spending in the Keynesian model results in:

Question

a higher level of aggregate spending

an unchanged multiplier

a higher equilibrium level of income, ceteris paribus

all the above statements are correct

Answer 1

In the Keynesian model, government spending has several notable impacts:

1. A higher level of aggregate spending: When the government increases its spending, it directly contributes to aggregate demand, which raises the overall level of spending in the economy.

2. An unchanged multiplier: The government spending multiplier does not necessarily change with an increase in government spending; however, it is influenced by factors like the marginal propensity to consume. The traditional Keynesian model assumes that the multiplier remains constant in the short run.

3. A higher equilibrium level of income, ceteris paribus: Increased government spending leads to a rise in aggregate demand, which typically results in a higher equilibrium level of income, assuming all other factors are constant (ceteris paribus).

Given these points, the correct answer is:

All the above statements are correct.