Which group is typically responsible for the largest share of spending in the economy?

• A. Businesses
• B. Foreign sector
• C. Government
• D. Households

Answer: (D)

Verified step by step guidance

1. Understand the main sectors of the economy: Households, Businesses, Government, and the Foreign sector. Each plays a role in spending and income generation.
2. Recall that households are the primary consumers of goods and services, purchasing everything from food to housing to entertainment, which constitutes a large portion of total spending.
3. Recognize that businesses spend on investment goods, the government spends on public services and infrastructure, and the foreign sector involves exports and imports, but these are generally smaller compared to household consumption.
4. Identify that in national accounts, household consumption expenditure is typically the largest component of aggregate demand or total spending in the economy.
5. Conclude that because households purchase the majority of goods and services, they are responsible for the largest share of spending in the economy.