Which of the following statements about the multiplier is most accurate?
A. The multiplier only applies to increases in initial spending.
B. The multiplier applies to both increases and decreases in initial spending.
C. The multiplier is rarely associated with changes in investment spending.
D. The multiplier only applies to decreases in initial spending.
Answer: B
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Inflation is often accompanied by
a. seigniorage b. forced saving c. financial repression d. large government budget deficits e. all of the above
Explain the mainstream economists’ justification for the use of discretionary fiscal and monetary policy and their criticisms of policy rules.
What will be an ideal response?
When the government chooses to use resources to build a dam, these sources are no longer available to build a highway. This choice illustrates the concept of
A) a market mechanism. B) macroeconomics. C) opportunity cost. D) a fallacy of composition.
Tying the salaries of top managers to the firm's stock price or to the profitability of the firm allows a firm's board of directors to
A) avoid disclosing financial statements to investors. B) eliminate moral hazard. C) increase asymmetric information. D) reduce the principal-agent problem.