CFA CFA Level 1 Question of the Week – Economics

Question of the Week – Economics

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    • AdaptPrep
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      If government spending increases, and total expenditures, investments, and the trade balance remains constant, consumption most likely will:

      • Decrease
      • Increase
      • Remain unchanged
    • AdaptPrep
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      This question is an application of the total expenditures
      formula:

      Total Expenditure = Consumption + Investments + Government
      Spending + Net Exports

      Solving for consumption, we get:

      Consumption = Total Expenditure – Investments – Government
      Spending – Net Exports

      If all the other items remain equal and government spending
      increases, consumption will
      decrease.

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