If the government withdrew $50 billion from the spending stream, the level of economic activity would:

Question

Quizplus · Accepted Answer

The correct answer is D because of the multiplier effect in economics. When the government withdraws $50 billion from the economy, it not only reduces the direct spending by this amount but also decreases subsequent rounds of spending that would have been generated by the initial expenditure. This leads to a total decrease in economic activity that is greater than the initial withdrawal.

If the Government Withdrew $50 Billion from the Spending Stream