In response to a temporary increase in government spending, the representative consumer consumes
A) more and takes more leisure.
B) more and takes less leisure.
C) less and takes more leisure.
D) less and takes less leisure.
E) the same amount as leisure.

Question

Quizplus · Accepted Answer

A temporary increase in government spending typically leads to higher taxes or borrowing, reducing disposable income. The representative consumer consumes less and takes less leisure as they work more to maintain their consumption level.

In Response to a Temporary Increase in Government Spending, the Representative