Question

Suppose small business owners decide to spend less. how will this affect an economy? it will cause prices for many goods to increase. it will have no impact, since this group makes up a small portion of any economy. it will increase the level of income in the economy, since other groups will spend more. it will decrease the level of income of other people, since one person's spending is someone else's income.

Answer 1

Answer: It will decrease the level of income of other people, because one person's spending becomes someone else's income.

Explanation: In a closed economy, one persons spending is other persons income. Thus, when the small business decides to spend less, it will directly reduce the income of other people in the economy.

For instance, let us assume the small business is spending less on labor, then labor will have less income to spend on other goods and services.

So, the correct option is it will decrease the level of income of other people, because one person's spending becomes someone else's income.