The multiplier in the Keynesian income-expenditure model, would be smallest to largest in order of magnitude inGroup of answer choicesthe open economy case with endogenous taxes, the closed economy case with endogenous taxes and the simple case without government or external sectorsthe open economy case with endogenous taxes, the simple case without government or external sectors and the closed economy case with endogenous taxesthe closed economy case with endogenous taxes, the simple case without government or external sectors and the open economy case with endogenous taxesthe closed economy case with endogenous taxes, the open economy case with endogenous taxes and the simple case without government or external sectors.
Question
The multiplier in the Keynesian income-expenditure model, would be smallest to largest in order of magnitude inGroup of answer choicesthe open economy case with endogenous taxes, the closed economy case with endogenous taxes and the simple case without government or external sectorsthe open economy case with endogenous taxes, the simple case without government or external sectors and the closed economy case with endogenous taxesthe closed economy case with endogenous taxes, the simple case without government or external sectors and the open economy case with endogenous taxesthe closed economy case with endogenous taxes, the open economy case with endogenous taxes and the simple case without government or external sectors.
Solution
The multiplier in the Keynesian income-expenditure model, would be smallest to largest in order of magnitude in:
The open economy case with endogenous taxes, the closed economy case with endogenous taxes, and the simple case without government or external sectors.
Explanation:
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The open economy case with endogenous taxes: In an open economy with endogenous taxes, the multiplier is smallest because there are more leakages from the circular flow of income. These leakages include savings, taxes, and imports, which reduce the overall impact of an initial change in spending.
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The closed economy case with endogenous taxes: In a closed economy with endogenous taxes, the multiplier is larger than in an open economy because there are fewer leakages. The only leakages in this case are savings and taxes.
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The simple case without government or external sectors: In this case, the only leakage is savings, so the multiplier is the largest. This is because all of the income that is not saved is spent, creating a larger multiplier effect.
Similar Questions
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