The Keynesian view of an increase in government spending results in an increase in interest rate and…
The velocity of money increases when income rises while the money stock is unchanged. In the standard Keynesian framework, the higher interest rate reduces desired money…
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The Keynesian view of an increase in government spending results in an increase in interest rate and income. However, the money stock remains unchanged, with velocity of money
Answer and explanation
Correct answer A
The velocity of money increases when income rises while the money stock is unchanged. In the standard Keynesian framework, the higher interest rate reduces desired money balances relative to income, so a given stock of money supports more spending.
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West Bengal SET (WB SET)