An increase in Social Security payments to retired persons has what effect on equilibrium income?
A)GDP will fall.
B)GDP will rise.
C)GDP will remain the same.
D)GDP will fall by less than the increase in payments.

Question

Quizplus · Accepted Answer

An increase in Social Security payments to retired persons will increase their disposable income, leading to an increase in consumption spending. This increase in consumption spending will lead to an increase in aggregate demand, which will result in an increase in equilibrium income (GDP). Therefore, the correct choice is B.

An Increase in Social Security Payments to Retired Persons Has