Question

Arrange the following statements based on Keynesian theory.
(A) Level of aggregate income rises in Keynesian world.
(B) Aggregate Saving as a function of GDP rises.
(C) Government expenditure rises.
(D) Fiscal deficit rises, given revenue receipts.

• A. (A), (C), (D), (B), (A)
• B. (C), (D), (A), (B)
• C. (C), (B), (A), (D)
• D. (D), (C), (B), (A)

Hint:

How do changes in government spending influence income and savings?

Answer 1

The Correct Option is B

In *Keynesian theory*, an increase in government expenditure raises income levels, which in turn raises aggregate savings as a function of GDP.

As income rises, fiscal deficit also increases, assuming the government expenditure continues.

Therefore, the correct order is (C), (D), (A), (B). Hence, the correct answer is (b).