An initial injection of new investment triggers the income multiplier into action and people's incomes and consumption spending grow. Firms expect the growth to continue and purchase more investment goods. The coupling of the effects of the accelerator and the effects of the income multiplier
a. work against each other
b. creates no gain in the economy as the effects cancel each other out
c. creates the downward phase of the business cycle
d. creates the upward phase of the business cycle
e. explains why real business cycle theorists believe the economy is unstable and cyclical
D
You might also like to view...
What does the term "conditionality" mean in respect to the policies of the International Monetary Fund (IMF)?
A) The IMF will grant loans to any country that seeks them. B) The IMF will cut off loans to a country unless it meets certain specified policy goals regarding budget deficits, inflation, and other macroeconomic concerns. C) The IMF will work with a country only if country destroys its own fiat money and instead adopts the euro. D) The IMF will assist any foreign country that supports the military policies of the U.S. and Great Britain.
A doctor pursuing his own interests rather than the interests of his patients is an example of the principal-agent problem
Indicate whether the statement is true or false
Total utility will be at its maximum when
a. marginal utility is negative. b. marginal utility is positive. c. marginal utility is maximized. d. marginal utility is zero.
When the quality of a good deteriorates while its price remains the same, the purchasing power of the dollar
a. increases, so the CPI overstates the change in the cost of living if the quality change is not accounted for. b. increases, so the CPI understates the change in the cost of living if the quality change is not accounted for. c. decreases, so the CPI overstates the change in the cost of living if the quality change is not accounted for. d. decreases, so the CPI understates the change in the cost of living if the quality change is not accounted for.