The income-expenditure identity is best paraphrased as

Question

Quizplus · Accepted Answer

The income-expenditure identity states that total spending in an economy must equal total income generated. This means that when someone spends money, it generates income for someone else. Therefore, option A is the best paraphrase of the income-expenditure identity. Option B is incorrect because profits can also be distributed as dividends to shareholders, and not necessarily all used for investment spending. Option C is incorrect because consumers can save, and saving is also a component of total spending. Option D is incorrect because governments can borrow money to finance spending beyond what they collect in income taxes.

The Income-Expenditure Identity Is Best Paraphrased as