If prices are sticky, lower planned expenditure will
A) increase production which will increase incomes, which will increase consumption spending, which will further increase planned expenditure.
B) decrease production which will decrease incomes, which will decrease investment spending, which will further decrease planned expenditure.
C) decrease production which will decrease incomes, which will decrease consumption spending, which will further decrease planned expenditure.
D) decrease production which will increase incomes, which will increase consumption spending, which will further increase planned expenditure.

Question

Quizplus · Accepted Answer

When prices are sticky, a decrease in planned expenditure leads to a decrease in production. This, in turn, leads to lower incomes, which results in decreased consumption spending, further reducing planned expenditure.

If Prices Are Sticky, Lower Planned Expenditure Will