FIGURE 10-5
imageAn Increase in Government Purchases in the Keynesian Cross An increase in government purchases of ΔG 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 ΔY exceeds the increase in government purchases ΔG. Thus, fiscal policy has a multiplied effect on income.