The multiplier effect occurs because
A. When national income rises, the MPC increases, prompting further increases in income.
B. The new income generated by an increase in aggregate demand will be spent, each time becoming new income again.
C. The level of national income must be multiplied by the average propensity to consume to find total consumption spending.
D. What business firms view as spending is viewed by households as income, so that new investment automatically becomes new income.
B. The new income generated by an increase in aggregate demand will be spent, each time becoming new income again.
You might also like to view...
If more firms enter the telecommunications industry, we can expect the equilibrium price of telecom services to decrease and the equilibrium number of services to increase
a. True b. False Indicate whether the statement is true or false
Which one of the following statement is false?
A) Traditional and ecological economics may come up with different policy recommendations B) Most standard natural resource and environmental economics is an extension of microeconomic theory C) Cost-benefit analysis excludes the values of non-marketed goods D) Valuation techniques may be insufficient to capture the scope of global environmental problems
Which of the following statements is not true?
A. U.S. currency is legal tender. B. For most of history gold has been the most common commodity money. C. The most common form of money in the U.S. is not a commodity money. D. Gold is an example of a fiat money.
The purpose of social regulation is
A) to force a firm to produce at the point where marginal cost equals marginal revenue. B) to control the quality of service provided by a monopolist. C) to control the price that regulated enterprises are allowed to charge. D) to focus on the impact of production on the environment and society, the working conditions under which goods and services are produced, and sometimes the physical attributes of goods.