Which of the following best explains what will happen if the government purchases share of GDP falls?
A)The net export share of GDP will fall with it.
B)The consumption share of GDP will fall with it.
C)The investment, consumption, and/or net export share of GDP will rise.
D)The investment share of GDP will fall with it.
E)It is not clear whether any of the other shares will change since we don't know what happens to GDP.

Question

Quizplus · Accepted Answer

When the government purchases share of GDP falls, the shares of GDP attributed to investment, consumption, and/or net exports will increase to compensate, assuming the total GDP remains constant. This is because the GDP is composed of government spending, investment, consumption, and net exports. A decrease in one component, holding total GDP constant, would necessitate an increase in one or more of the other components.

Which of the Following Best Explains What Will Happen If