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

*Keynesian theory* posits that increased government expenditure elevates income levels, which in turn boosts aggregate savings relative to GDP.

Assuming continued government expenditure, rising income also leads to an expanded fiscal deficit.

Thus, the correct sequence is (C), (D), (A), (B). Therefore, option (b) is the correct answer.