If the share of government spending decreases by 2 percentage points,the consumption share will
A)increase by 2 percentage points.
B)increase by less than 2 percentage points.
C)decrease by less than 2 percentage points.
D)increase by more than 2 percentage points.
E)decrease by more than 2 percentage points.

Question

Quizplus · Accepted Answer

If the share of government spending decreases, it will leave more resources for private consumption. However, the increase in consumption will be less than the decrease in government spending because some of the resources will be saved or invested. Therefore, the consumption share will increase by less than 2 percentage points.

If the Share of Government Spending Decreases by 2 Percentage