What is the significance of the multiplier? What causes the multiplier to be larger or smaller?
What will be an ideal response?
The multiplier is important because it means that a relatively small change in autonomous spending, such as investment spending or net exports, can have a much larger effect on total spending and real Gross Domestic Product (GDP). The greater the marginal propensity to consume (MPC), the greater the multiplier because more of a given increase in income is spent, raising the income of other people by more.
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The Social Security system was founded
A) during the Civil War, to pay pensions for veterans. B) during the last years of the nineteenth century, as people who had once depended on having a family farm found themselves without a means of support. C) as the United States began to recover from the Great Depression. D) in response to concerns that arose during the high inflation of the 1970s.
Discouraged workers are people who want to work but have given up trying to find a job after an unsuccessful search
a. True b. False Indicate whether the statement is true or false
Suppose that the government increases taxes. One effect of this change is that it decreases
a) disposable income, which decreases consumption expenditure and aggregate demand b) government expenditure, which decreases aggregate demand c) the size of the government expenditure multiplier d) disposable income which then decreases aggregate supply
GDP growth on a year-to-year basis is called
A. short-term growth. B. real growth. C. long-term growth. D. nominal growth.