In an open economy, with a fixed exchange rate and no government intervention, a ____ in planned
Consumption spending would ______ output and inflation.
A) rise, not change
B) rise, reduce
C) fall, increase
D) fall, reduce

Question

Quizplus · Accepted Answer

In an open economy with a fixed exchange rate and no government intervention, a fall in planned consumption spending would reduce both output and inflation. Lower consumption leads to decreased demand for goods and services, which in turn reduces production output and pressures prices to fall, thus reducing inflation.

In an Open Economy, with a Fixed Exchange Rate and No