In the New-Keynesian model where government expenditure is financed through taxation only, if government expenditure increases by 100, which of the following is true? A. Income will increase by 100. B. Income will increase by more than 100 as the fiscal multiplier is greater than 1. C. Income will not change as the increase in government expenditure would crowd out private consumption. D. Income will increase, but we can't say by how much.
