The effect of a government surplus upon the equilibrium level of NNP (Net National Product) is substantially the same as :

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Q: 62 (CDS-II/2013)
The effect of a government surplus upon the equilibrium level of NNP (Net National Product) is substantially the same as :

question_subject: 

Economics

question_exam: 

CDS-II

stats: 

0,24,52,31,24,21,0

keywords: 

{'government surplus': [0, 0, 0, 1], 'net national product': [0, 1, 2, 2], 'nnp': [0, 0, 0, 2], 'equilibrium level': [0, 0, 0, 2], 'consumption': [2, 4, 6, 10], 'investment': [0, 0, 0, 1], 'increase': [3, 1, 10, 35], 'effect': [4, 0, 2, 7], 'decrease': [0, 0, 0, 1]}

The correct answer for this question is option 2: an increase in consumption.

When the government has a surplus, it means that it is collecting more revenue than it is spending. This surplus can be used in various ways, such as reducing taxes or increasing government spending on public goods and services.

If the government decides to use the surplus to reduce taxes, it will put more money into the hands of consumers. This increase in disposable income will lead to an increase in consumption, as individuals have more money available to spend on goods and services.

Increased consumption leads to an increase in aggregate demand, which affects the equilibrium level of Net National Product (NNP). NNP measures the total value of goods and services produced by a country`s residents over a specific period of time.

Therefore, an increase in consumption resulting from a government surplus will have a similar effect on the equilibrium level of NNP as an increase in consumption from other sources, such as increased income or consumer confidence.

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