A temporary increase in government purchases,when total output is held constant,would
A)reduce desired consumption but would increase desired national saving.
B)increase desired consumption but would reduce desired national saving.
C)increase both desired consumption and desired national saving.
D)reduce both desired consumption and desired national saving.

Question

Quizplus · Accepted Answer

A temporary increase in government purchases reduces national saving because it decreases the amount of resources available for private saving, and it also reduces desired consumption as individuals anticipate higher future taxes or reduced government benefits to offset the increased spending.

A Temporary Increase in Government Purchases,when Total Output Is Held