Consider the Circular Flow of Income Model with Households and Firms

Multiple Choice

Consider the circular flow of income model with households and firms as the two sectors.If business spending (investment) were suddenly decreased due to expectations of a dismal economy in the near future,then because total purchases would suddenly be reduced:

A) the income created would be reduced,and the value of output and the value of income would decline.
B) the income created would be reduced,and the value of output and the value of income would no longer be equal.
C) the income created would be reduced,and the value of output and the value of income would increase.
D) the income created would be reduced,and the value of output and the value of income would decline until the foreign sector was introduced.
E) the household sector would try to save more.