AP Macroeconomics Question 434: Answer and Explanation

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Question: 434

9. In a private closed economy, which of the following statements is true?

  • A. Household saving can never be negative.
  • B. Investment is always greater than savings.
  • C. The economy is in equilibrium when consumption equals saving.
  • D. Saving is equal to zero when consumption equals disposable income.
  • E. Government is the only source of spending and investment.

Correct Answer: D


D-Consumption spending is equal to disposable income minus saving: C = DI – S.