Which of the Following Is an Example of the Multiplier

question 88

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:

Liability Account

An accounting record used to track obligations the company owes to others, such as loans, leases, or accounts payable.

Expense Account

An account in which businesses record and track expenditures related to specific activities, such as travel or entertainment, for accounting purposes.

Credit Postings

Entries made on the credit side of an account, indicating an increase in liabilities, revenue, or equity and a decrease in assets.

Debit Postings

Entries made on the left side of a ledger account, indicating an increase in assets or expenses or a decrease in liabilities, equity, or revenue.