Figure 12-2
-Refer to Figure 12-2.If the U.S.economy is currently at point N,which of the following could cause it to move to point K?
A)Households expect future income to rise.
B)Household wealth falls.
C)Firm's cash flows rise as profits rise.
D)Government expenditures increase.

Question

Figure 12-2 
-Refer to Figure 12-2.If the U.S.economy is currently at point N,which of the following could cause it to move to point K?
A)Households expect future income to rise. 
B)Household wealth falls. 
C)Firm's cash flows rise as profits rise. 
D)Government expenditures increase.

Quizplus · Accepted Answer

Moving from point N to point K involves a decrease in consumption and an increase in savings. This can occur if household wealth falls, which would lead to a decrease in consumption and an increase in savings as households try to rebuild their wealth. The other options (A, C, and D) would likely lead to an increase in consumption and a decrease in savings, which would move the economy further away from point K.

Figure 12-2 -Refer to Figure 12-2.If the U.S.economy Is Currently at Point