How will an increase in the government budget surplus as a result of lower government spending (with no change in net taxes)affect private saving in the economy?

Question

Quizplus · Accepted Answer

When there is a decrease in government spending, the government budget surplus increases. This means that the government is taking in more money than it is spending. As a result, there may be less demand for goods and services in the economy. This could lead to a decrease in the overall level of economic activity, which could in turn reduce private saving. However, the decrease in private saving is likely to be less than the increase in the government budget surplus because some of the money that the government is saving will still be circulating in the economy, which could offset some of the negative effects on private saving. Therefore, private saving will decrease by less than the amount of the increase in the budget surplus.

How Will an Increase in the Government Budget Surplus as a Result