If Say's Law holds true, then if households save more of their incomes,
A) the economy will experience a recession.
B) firms will increase spending by the same amount.
C) the government will increase taxes on savings to discourage it.
D) government spending will increase.

Question

Quizplus · Accepted Answer

If Say's Law holds true, then increased saving leads to increased investment by firms, resulting in increased production and employment, thereby maintaining the equilibrium of the economy. This is based on the assumption that any increase in savings will be matched by an equal increase in investment. Therefore, option B is the most appropriate answer.

If Say's Law Holds True, Then If Households Save More