In an open economy with government and demand-determined output,an increase in the equilibrium level of national income could be caused by
A)an increase in taxes at all levels of income.
B)an increase in the desired level of imports at all levels of income.
C)a decrease in desired consumption at all levels of income.
D)a decrease in the desired level of saving at all levels of income.
E)a decrease in government purchases.

Question

Quizplus · Accepted Answer

A decrease in the desired level of saving at all levels of income would mean that households and businesses are spending more, leading to an increase in aggregate demand and output. This increase in output would lead to an increase in national income. The other choices would lead to a decrease in aggregate demand and output, causing a decrease in national income.

In an Open Economy with Government and Demand-Determined Output,an Increase