The impact of the multiplier effect is 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 real GDP.
D. reduce the impact of an increase in investment on output and employment.
Answer: C
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In the above figure, if five million CDs per month are produced and consumed, that is
A) better than producing and consuming four million CDs because more is always better than less. B) more than the efficient quantity because the marginal social benefit exceeds the marginal social cost. C) more than the efficient quantity because the marginal social cost exceeds the marginal social benefit. D) less than the efficient quantity because the opportunity cost exceeds the marginal social benefit.
Many economists believe a general sales tax (particularly on items such as food) takes a larger proportion of income from low-income households than from high-income households. If this is true, a general sales tax is a
a. regressive tax. b. proportional tax. c. neutral tax. d. progressive tax.
Most developed countries experience deficit spending.
Answer the following statement true (T) or false (F)
The argument that supply of apartments is inelastic in the short run is based on the idea that
A. it takes time to build new apartments. B. it is costly to move to a different location. C. landlords will fix up many new apartments when there are small changes in rent. D. people will change apartments quickly when there are small changes in rent.