Classical macroeconomic theorists argued that when households reduce consumption and deposit money into savings accounts, aggregate spending will:
A. increase because households will have more wealth.
B. fall because banks typically make it difficult for businesses to borrow money.
C. fall because consumers are saving instead of spending.
D. not fall because banks will lend that money out to businesses.
Answer: D
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Adam Smith wrote that the:
a. government should control the economy. b. public or collective interest is not promoted by people pursuing their self interest. c. pursuit of private self interest promotes the public interest in a market economy. d. economic problems of eighteenth-century England were caused by free markets.
According to the law of diminishing returns, if population grows, but the amount of available resources stays the same, output will ______.
a. fall at an inverse rate b. stay the same c. rise, but by ever shrinking amounts d. rise at a steady rate