If consumption spending increases by $10 million with no changes in net transfer payments, then:
A)public saving increases
B)public saving decreases
C)private saving increases
D)private saving decreases

Question

Quizplus · Accepted Answer

Private saving is equal to disposable income minus consumption spending. If consumption spending increases by $10 million, then disposable income must have also increased by $10 million to offset the increase. Therefore, private saving decreases because disposable income and consumption spending both increased. Public saving is not affected by this change.

If Consumption Spending Increases by $10 Million with No Changes