If consumption increases, and government spending decreases by an equal amount, and investment stays the same

Question

Quizplus · Accepted Answer

Absorption in an economy is the total amount of goods and services consumed or invested, and it is calculated as the sum of consumer spending, investment, and government spending. If consumption increases and government spending decreases by an equal amount, with investment staying the same, the overall absorption does not change because the increase in consumption offsets the decrease in government spending.

If Consumption Increases, and Government Spending Decreases by an Equal