Question

If an economy’s GDP falls, then it must be the case that the economy’s Group of answer choices income falls and saving rises. income and saving both fall. income falls and expenditure rises. income and expenditure both fall.

Answer 1

Answer:

income and expenditure both fall

Explanation:

GDP can be calculated by 2 approaches; income approach and expenditure approach.

Income approach is the sum of all income in the economy such as wages, salaries, and companies profits, whereas expenditure approach is the sum of all expenditure such as private consumption, consumption in capital goods, the government expenditure and net export. The GDP calculated by these 2 ways are equal. Thus, if an economy's GDP fall, both income and expenditure fall.