An Example of the Multiplier Effect Is When

question 77

Multiple Choice

An example of the multiplier effect is when

• A) the government increases government spending initially by $100 billion,and total income in the economy increases by less than $100 billion.
• B) an increase in the price level leads to a shift in the aggregate demand curve.
• C) the government increases government spending initially by $100 billion,and total income in the economy increases by more than $100 billion.
• D) an increase in government spending leads to a decrease in private investment.
• E) short-run aggregate supply shifts in a response to fiscal policy.

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Definitions:

Ideal Cost-Of-Living Index

A theoretical measure representing the change in the amount of money needed to maintain a certain standard of living.

Utility

A measure of satisfaction or happiness that a consumer receives from consuming goods and services.

Current Prices

Prices at which goods and services are sold in the market at the present time, not adjusted for inflation or other factors that affect purchasing power.

Base-Year Prices

Prices from a specific base year that are used to calculate real values or quantities, allowing for the comparison of economic data over time by removing the effects of inflation.