CISI Chartered Wealth Manager Practice Questions - CISI Chartered Wealth Manager Qualification (CWM) Exam

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In the macroeconomic circular flow, an increase in the household savings ratio, all else equal, is most likely to have which immediate effect on aggregate demand?

It reduces consumption, lowering aggregate demand in the short run It raises consumption, increasing aggregate demand It has no effect because savings always equal investment It directly increases government spending

Correct Answer:

It reduces consumption, lowering aggregate demand in the short run

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