Suppose the government share of GDP is 25 percent and the consumption, investment, and net export shares of GDP are 60, 15, and 3 percent, respectively. Under these circumstances, we would expect
A)the government share of GDP to increase.
B)the interest rate to increase.
C)the interest rate to remain constant.
D)the interest rate to decrease.
E)net exports to increase.

Question

Quizplus · Accepted Answer

Given the shares of GDP components, the total exceeds 100% (25% government + 60% consumption + 15% investment + 3% net exports = 103%). This implies an economy operating at or beyond its capacity, likely leading to increased demand for funds for investment, consumption, and government spending, which can drive up interest rates.

Suppose the Government Share of GDP Is 25 Percent and the Consumption