The reason for the multiplier effect is that
a. businesses make decisions about investment projects based on anticipated profits.
b. one person's additional expenditure creates a new source of income for another person, and this additional income leads to still more spending.
c. changes in government spending typically deepen recessions and exacerbate inflationary conditions in the economy.
d. additional spending lowers the rate of interest and leads to further borrowing and spending.
b
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Explain the three components of the balance of payments accounts. What must these three balances sum to?
What will be an ideal response?
Why must the M2 measure of the money supply always be larger than the M1 measure?
What will be an ideal response?
To some economists, the "Great moderation" means:
a. a small change in real wages. b. a low inflation rate. c. a low unemployment rate. d. low output growth variability. e. low money supply growth.
Inventions like gunpowder and the wheelbarrow were created by the Chinese hundreds of years ago. The fact that such items were not put to productive use was caused primarily by a lack of ____
a. financial capital b. entrepreneurship c. an adequate price system d. marginal analysis