The multiplier effect tends to
A. promote stability of the general price level.
B. generate instability.
C. magnify small changes in spending into much larger changes in real Gross Domestic Product (GDP).
D. increase the MPC.
Answer: C
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When there is a change in the quantity demanded it means that
A) the selling price of the products has not changed. B) the number of products in inventory have increased. C) the hours the customer can buy products each day have increased. D) the quantity a consumer is willing to buy changes when the price changes.
Since income tax revenues will rise (fall) as expenditures and output increase (decrease) the income tax results in
A) a reduction in the multiplier effect on GDP of autonomous expenditures. B) automatic stabilization of GDP. C) A and B. D) None of the above.
A __________ exchange rate policy sets a fixed and unchanging value for the exchange rate against another currency.
a. soft peg b. floating c. hard peg d. defined
Why does a typical monopolistically competitive firm face a downward-sloping demand curve?