If the Government Increases Spending While Holding Taxes Constant, We

question 83

Multiple Choice

If the government increases spending while holding taxes constant, we expect

• A) an increase in investment spending by businesses too, as they anticipate future economic growth.
• B) a decrease in real saving as consumers follow suit and also increase borrowing.
• C) planned real investment spending by businesses to increase.
• D) interest rates to rise.

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Definitions:

Marginal Utility

The boost in satisfaction or usefulness experienced by someone when they consume another unit of a good or service.

Spending

The process of spending money to buy goods or services.

Income

The amount of money received over a period of time through work, business, investments, or other sources.

Goods

Tangible items that satisfy human wants or needs and are available for purchase.