Imagine an economy in a recession resulting from a decrease in consumer spending.In the best case scenario,increased government spending to fight the recession would:
A) be offset by a decrease in inflation.
B) need to be a little more than the initial fall in consumer spending to make up for lost GDP.
C) not need to be as large as the initial fall in consumer spending.
D) need to be exactly the same amount as the initial fall in consumer spending.

Question

Quizplus · Accepted Answer

Increased government spending can stimulate demand for goods and services, leading to an increase in GDP. However, it may not need to be as large as the initial fall in consumer spending as it can have a multiplier effect, where the funds spent by the government lead to increased income and spending by businesses and households, further boosting the economy. Therefore, even a smaller increase in government spending can have a significant impact on the economy.

Imagine an Economy in a Recession Resulting from a Decrease