Government's transfer payments to individuals affect desired aggregate expenditure
A) directly.
B) through the consumption function.
C) through the investment function.
D) through net exports.
E) through the government's budget deficit.

Question

Government's transfer payments to individuals affect desired aggregate expenditure 
A) directly.
B) through the consumption function.
C) through the investment function.
D) through net exports.
E) through the government's budget deficit.

Quizplus · Accepted Answer

Transfer payments to individuals are a part of disposable income, which is a key determinant of consumption. The consumption function relates disposable income to desired aggregate expenditure, so transfer payments indirectly affect desired aggregate expenditure through the consumption function.

Government's Transfer Payments to Individuals Affect Desired Aggregate Expenditure