In an economy with no government and no international trade, consumption expenditures will be less than the total value of goods and services when
A) investment is zero.
B) saving is zero.
C) people save some of their income.
D) people barter rather than use money in making exchanges.

Question

Quizplus · Accepted Answer

In an economy with no government and no international trade, consumption expenditures will be less than the total value of goods and services when people save some of their income. This is because saving represents a leakage from the economy, as the saved funds are not being directly spent on goods and services. Therefore, the total value of goods and services produced (which represents the income earned by individuals) will exceed consumption expenditures. Choices A, B, and D do not explain why consumption expenditures would be less than the total value of goods and services.

In an Economy with No Government and No International Trade