According to the “paradox of thrift”, for the simple Keynesian income-expenditure model where there is no government or external sector,Group of answer choicesin the aggregate an increase in the proportion of income which households wish to save will lead to a rise in the level of investment and a rise in the level of incomewhile an individual may increase the proportion of income which they save, if all individuals do this aggregate income falls leaving aggregate saving unchangedan increase in the proportion of income which individuals wish to save will in the aggregate lead to an increase in the size of the income-expenditure multiplierthe equilibrium level of income will not be affected by a change in the proportion of income which households wish to save.

n the simple two-sector Keynesian income-expenditure model with no government or external sector, assuming actual and planned saving are always equal, when aggregate output is less than aggregate planned expenditureGroup of answer choicesany unplanned change in inventories will be negativeactual investment is greater than planned investmentplanned saving is greater than planned investmentactual saving is equal to planned investment

In the Keynesian income-expenditure model, equilibrium income is necessarily equal to a multiple ofGroup of answer choicesthe exogenous component of planned aggregate expenditure which is partly dependent on the autonomous component of taxation when government is includedthe autonomous component of consumption, regardless of whether the economy is closed or openthe sum of investment, government expenditure and net exportsnone of the other alternatives are correct.

In the simple Keynesian model, which of the following statements is false? Group of answer choices An increase in the marginal propensity to save will reduce the level of income in the economy. The reduction in output from an increase in taxation is larger the smaller is the marginal propensity to consume. An increase in lump sum taxation accompanied by an increase in government spending of the same size will increase output. The equilibrium level of output does not depend upon the size of the money multiplier.

Adding an external sector to the Keynesian income-expenditure model implies that for equilibrium, in terms of leakages and injectionsGroup of answer choicesplanned saving must equal planned investmentplanned saving must equal planned investment, government expenditure must equal total taxation and exports must equal imports it is not necessary for planned saving and planned investment to be equal but exports must be equal to imports it is not necessary for planned saving and planned investment to be equal but they are unequal then either the budget or the trade balance or both should not be equal to zero.

In the open-economy Keynesian income-expenditure model which includes a government sector with endogenous taxation, which of the following statements could apply to the process of adjustment towards an equilibrium?Group of answer choicesAn increase in government expenditure, without any changes in investment or exports must generate a matching change in the sum of saving, taxation and imports.An increase in investment by itself will generate a rise in saving, imports and taxation via changes in the level of income.An increase in injections would cause a matching increase in withdrawals because of the resulting change in the level of income occurring through the multiplier.All of the other statements are correct.