The introduction of government spending in the three-sector model causes:

CA Foundation · Business Economics · MTP · May 2026
The introduction of government spending in the three-sector model causes:
(A) A. Equilibrium income to fall
(B) B. No change in equilibrium
(C) C. Multiplier effect with additional income impact
(D) D. Only reduces taxes

Suggested Answer and Working Notes:

Correct Answer: Option (C)

C. Multiplier effect with additional income impact

Topics: Determination of National Income

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