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.
Answer: B
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An increase in investment spending would cause the FE line to
A) shift to the right. B) shift to the left. C) remain unchanged. D) remain unchanged if Ricardian equivalence holds; otherwise, shift to the right.
Internal markets
A) can be useful suppliers of information. B) suffer from some of the same problems that external markets suffer. C) are becoming increasingly popular. D) all of these choices.
The amount of goods and services that a person can produce in a given time is called
a. labor input b. labor intensive c. labor output d. labor productivity
According to economist Jean-Pierre Dube, a 10 percent increase in the price of a twelve-pack of Mountain Dew will lead to a ______ percent increase in the sales of twelve-packs of Pepsi.
a. 10 b. 7.7 c. –5 d. –8.2