The fallacy of the broken window suggests that the repair costs of a broken window:
A) increase total spending and stimulate the economy.
B) are offset by reductions in other spending and thus do not stimulate the economy.
C) reduce total spending because shopkeepers save more to be prepared for other emergencies.
D) increase total spending but do not stimulate the economy.

Question

Quizplus · Accepted Answer

The fallacy of the broken window, as explained by French economist Frédéric Bastiat, suggests that while the repair costs of a broken window might seem to increase spending (and thus stimulate the economy), this spending merely diverts resources from other uses. Therefore, it does not actually stimulate the economy because the money spent on repairs would have been spent on other goods or services, contributing to economic activity in other areas.

The Fallacy of the Broken Window Suggests That the Repair