Which of the Following Statements Is True

question 2

Multiple Choice

Which of the following statements is true?

• A)A change in government purchases affects income.However, the change in income does not affect consumption.
• B)A change in government purchases does not affect income or consumption.
• C)A change in government purchases affects GDP, which is the same as income.The change in income affects consumption.
• D)A change in government purchases affects GDP but not income.
• E)A change in government purchases has no effect on GDP, but it does affect consumption.

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Definitions:

Economists

Experts focused on analyzing how goods and services are produced, distributed, and consumed.

Opportunity Cost

The loss of potential gain from other alternatives when one particular option is chosen.

Tax Cut

A reduction in the amount of taxes that individuals or corporations owe to the government.

Market Economy

An economic system where decisions regarding investment, production, and distribution are based on supply and demand, with little government intervention.