Which of the following events will cause a reduction in equilibrium output?
A) an increase in the marginal propensity to save
B) an increase in taxes
C) a reduction in the marginal propensity to consume
D) all of the above
E) none of the above
Question 2
Based on our understanding of the paradox of saving, we know that a reduction in the desire to save will cause
A) an increase in equilibrium GDP.
B) a reduction in GDP.
C) an increase in the desire to invest.
D) no change in equilibrium GDP.
E) a permanent reduction in the level of saving.
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