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Question

If the public consumes €100 billion less and the government purchases €100 billion more (other things unchanging), which of the following statement is true?

A Saving is unchanged Correct Answer Incorrect Answer
B There is an increase in saving and the economy should grow more quickly. Correct Answer Incorrect Answer
C There is a decrease in saving and the economy should grow more slowly. Correct Answer Incorrect Answer
D There is not enough information to determine what will happen to saving. Correct Answer Incorrect Answer
E None of these Correct Answer Incorrect Answer

Solution

Savings will be unchanged if the public consumes €100 billion less and the government purchases €100 billion more (other things unchanging)

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