In the neoclassical model with fixed income, if there is a decrease in government spending with no change in taxes, then public saving and private saving .
A)increases; increases
B)increases; does not change
C)decreases; increases decreases;
D)does not change

Question

Quizplus · Accepted Answer

In the neoclassical model, a decrease in government spending increases public saving because the government budget deficit decreases. Private saving does not change because taxes and income remain constant.

In the Neoclassical Model with Fixed Income, If There Is