If GDP falls, what happens to income and expenditure?
A) Income must rise and expenditure must rise.
B) Income must fall and expenditure must fall.
C) Income must rise, but expenditure may rise or fall.
D) Expenditure must rise, but income may rise or fall.

Question

If GDP falls, what happens to income and expenditure?  
A) Income must rise and expenditure must rise. 
B) Income must fall and expenditure must fall. 
C) Income must rise, but expenditure may rise or fall. 
D) Expenditure must rise, but income may rise or fall.

Quizplus · Accepted Answer

When GDP falls, overall economic output decreases, which leads to a reduction in both income and expenditure. As companies become less profitable, they may reduce wages or lay off workers, resulting in decreased individual incomes. Additionally, consumers may reduce their spending as a result of economic uncertainty, leading to decreased expenditure. This is why the answer is B, as both income and expenditure fall when GDP falls.

If GDP Falls, What Happens to Income and Expenditure