Which of the Following Is an Example of the Multiplier

question 34

Multiple Choice

Which of the following is an example of the multiplier at work as a result of an increase in consumption expenditures?

• A)Consumers compete with the government by increasing their expenditures,causing businesses to increase their investments to satisfy the increased demand.
• B)Consumption expenditures increase inflation,which reduces real incomes;consumer expenditures and investment decline,which reduces aggregate spending.
• C)Households and businesses receive income from consumption expenditures;they spend a portion of this new income;these expenditures,in turn,generate income for other businesses and households,which in turn spend a portion of the new income,and so on.
• D)Consumption expenditures stimulate investment in new plants and equipment to produce goods and services for the government,which provides fewer jobs and decreases incomes.

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Definitions:

Ponzi Scheme

A fraudulent investing scam promising high rates of return with little risk to investors, funded by the incoming funds from new investors.

Investment Fraud

A scheme or deception relating to financial investments that results in financial loss for investors.

Investment Returns

The profit or loss derived from investing in securities, real estate, or other assets, typically expressed as a percentage.

Market Liquidity

The extent to which a market allows assets to be bought and sold quickly without affecting the asset's price significantly.