Economics · Macroeconomics
Assertion (A): In the IS-LM framework under general conditions, an increase in government expenditure raises income by less than the full Keynesian multiplier amount. Reason (R): The rise in government expenditure raises income, which increases the transactions demand for money; with a fixed money supply, interest rates rise and crowd out private investment. Choose the correct option:
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1A is false, R is true
- 2A is true, R is false
- 3Both A and R are true, but R is not the correct explanation of A
- 4Both A and R are true, and R is the correct explanation of A✓
Correct answer
Both A and R are true, and R is the correct explanation of A
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