FIGURE 10-5
An Increase in Government Purchases in the Keynesian Cross An increase in government purchases of Δ
G raises planned expenditure by that amount for any given level of income. The equilibrium moves from point A to point B, and income rises from
Y1 to
Y2. Note that the increase in income Δ
Y exceeds the increase in government purchases Δ
G. Thus, fiscal policy has a multiplied effect on income.