Refer to figure 2 below. Which of the following statements is NOT true? Figure 2 A) The upward shift in the expenditure line from C+I+G+(X- M)₁ to C+I+G+(X- M)₂ and consequent increase in national income would result from a reduction in interest rates. B) The upward shift in the expenditure line from C+I+G+(X- M)₁ to C+I+G+(X- M)₂ and consequent increase in national income would result from an increase in exports. C) The upward shift in the expenditure line from C+I+G+(X- M)₁ to C+I+G+(X- M)₂ and consequent increase in national income would result from a reduction in saving. D) The upward shift in the expenditure line from C+I+G+(X- M)₁ to C+I+G+(X- M)₂ and consequent increase in national income would result from a reduction in government expenditure.

Question

Quizplus · Accepted Answer

The upward shift in the expenditure line from C+I+G+(X-M)₁ to C+I+G+(X-M)₂ is caused by an increase in government expenditure, not a reduction. Therefore, statement D is not true.

Refer to Figure 2 Below