The Keynesian cross tells us that fiscal policy has a multiplied effect on income. The reason is that according to the consumption function, higher income causes higher con- sumption. For example, an increase in government purchases of ∆G raises expenditure and, therefore, income by ∆G. This increase in income causes consumption to rise by MPC × ∆G, where MPC is the marginal propensity to consume. This increase in con- sumption raises expenditure and income even further. This feedback from consumption to income continues indefinitely. Therefore, in the Keynesian-cross model, increasing government spending by one dollar causes an increase in income that is greater than one dollar: it increases by ∆G/(1 – MPC).