Within the Keynesian model, the multiplier effect tends to
a. smooth out the up- and down- swings of the business cycle.
b. promote price stability.
c. magnify small changes in spending into much larger changes in output and employment.
d. reduce the impact of an increase in investment on output and employment.
C
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When the price of compact disc players decreases, the demand for compact discs rises while the demand for cassette tapes decreases. What does this imply about the relationship between compact disc players, compact discs, and cassette tapes?
What will be an ideal response?
Which of the following is an example of marginal analysis?
a. a fast food restaurant that only serves lunch and dinner trying to determine if it should open for breakfast. b. a company looking at its total costs of production. c. a worker calculating his total income. d. an economist analyzing total output for the U.S. economy.
Explain what is happening to spending on Social Security and Medicare as the U.S. population continues to age. Why might this spending change pose problems for the U.S. economy?
What will be an ideal response?
Discuss the difference between first-best and second-best price regulation. In your answer, you should address why governments regulate markets and the difficulties faced when doing so.
What will be an ideal response?