GK
INDIAN ECONOMY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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If an economy is equilibrium at the point where plans to save and to invest are equal, then government expenditure must be
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zero
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equal to government income
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larger than government income
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negative
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Explanation:
Detailed explanation-1: -The equilibrium is reached only when Investment(I) equals Savings(S) because at this level there is no tendency for income and output to change. In this case then government expenditure must be equal to government income.
Detailed explanation-2: -The economy is in income–expenditure equilibrium when aggregate output, measured by real GDP, is equal to planned aggregate spending. Income–expenditure equilibrium GDP is the level of real GDP at which real GDP equals planned aggregate spending.
Detailed explanation-3: -An economy is said to be at its equilibrium level of income when aggregate supply and aggregate demand are equal. In other words, it is when GDP is equal to total expenditure.
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