Politicians often instruct households to spend in order to help the economy. This advice overlooks the fact that
A) increases in consumption will make it easier for households to deal with unanticipated future expenses.
B) increases in consumption will provide more loanable funds for investment.
C) you cannot have a strong economy if all or most households are spending just about everything they earn.
D) consumer spending is less than two-thirds of GDP.

Question

Politicians often instruct households to spend in order to help the economy.  This advice overlooks the fact that
A) increases in consumption will make it easier for households to deal with unanticipated future expenses.
B) increases in consumption will provide more loanable funds for investment.
C) you cannot have a strong economy if all or most households are spending just about everything they earn.
D) consumer spending is less than two-thirds of GDP.

Quizplus · Accepted Answer

The statement indicates that if all or most households are spending just about everything they earn, it would lead to a weak economy in the long run. Therefore, encouraging households to spend more is not always the best advise for the economy.

Politicians Often Instruct Households to Spend in Order to Help