Question

The Keynesian Theory "Bathtub" is illustrated below. Decreasing flows in one or more of the spending variables (C, I, G or NX) will, ceteris paribus, __________ the income, employment, and output (water level in the tub).a. increaseb. decreasec. maintaind. none of the above

Answer 1

Answer:

B) decrease

Explanation:

The Keynesian Bathtub Theory is an analogy between the economy and a bathtub where increases in government spending, consumption, business investments and exports, are shown as water flows into the bathtub. Decreasing spending will decrease the inflow of water into the bathtub which will result in lower income and employment.