If the share of government spending decreases by 5 percentage points, the consumption share will most likely
A)increase by 5 percentage points.
B)increase by less than 5 percentage points.
C)decrease by less than 5 percentage points.
D)increase by more than 5 percentage points.
E)decrease by more than 5 percentage points.

Question

Quizplus · Accepted Answer

If the share of government spending decreases by 5 percentage points, it means that there is less government spending on goods and services. This can lead to an increase in disposable income for individuals which could lead to an increase in consumption. However, the increase in consumption may not be equal to the decrease in government spending as some individuals may choose to save some of their extra income or use it to pay off debt. Therefore, the consumption share will most likely increase by less than 5 percentage points.

If the Share of Government Spending Decreases by 5 Percentage