How does the multiplier process work when there is an initial decrease in autonomous spending?
What will be an ideal response?
An initial decrease in autonomous spending will result in unsold goods. Producers will respond to the increase in inventory by decreasing production. Workers will be laid off, and income for households will decrease. This will cause a decrease in consumption, which translates into an additional decrease in the sale of goods and services for producers. More workers will be laid off, and income will decrease again. This process will continue until the total spending decrease equals the autonomous spending decrease times the multiplier.
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A statement of assets and liabilities of any business entity is
A) a sweep account. B) legal reserves. C) a balance sheet. D) net worth.
When Thomas Malthus argued that the prospects for human flourishing were gloomy and that starvation would eventually become the normal human condition, he was assuming that
A. self-interest will become more intense and religion will cease to be an influential force in society. B. epidemics will overpower the many technological advances that he expected. C. diminishing returns to production will become more apparent. D. diseconomies of scale will become more commonplace.
Protectionism through anti-dumping laws blocks imports that are sold below the cost of production by imposing ___________ that increase the price of these items to reflect their cost of production.
a. quotas b. tariffs c. standards d. sanctions
Which of the following functions is not performed by prices in a free market?
a. guiding the allocation of resources b. conveying information about the marginal cost of production c. making the distribution of income more equitable d. replacing the need for governmental supervision of production