In a closed economy with fixed output, when government spending increases:
A) private saving decreases.
B) private saving increases.
C) public saving decreases.
D) public saving increases.

Question

Quizplus · Accepted Answer

In a closed economy with fixed output, when government spending increases, it leads to a decrease in public saving. This is because an increase in government spending leads to an increase in the government's budget deficit, which is the difference between government spending and government revenue. As a result, public saving decreases. Private saving may or may not change, depending on other factors affecting the economy.

In a Closed Economy with Fixed Output, When Government Spending