Other Things Equal, the Multiplier Effect Associated with a Change

question 18

Multiple Choice

Other things equal, the multiplier effect associated with a change in government spending is

• A) the same as that associated with a change in taxes.
• B) equal to that associated with a change in investment or consumption.
• C) less than that associated with a change in investment.
• D) greater than that associated with a change in investment.

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Definitions:

Double-Declining-Balance Method

A method of accelerated depreciation which doubles the straight-line depreciation rate and applies it to the asset's remaining book value each year.

Depreciation

The method of distributing the expense of a physical asset over its lifespan to represent its depreciation over time.

Residual Value

The estimated salvage value of an asset at the end of its useful life, representing what it could be sold for or would be worth at that future time.

Accumulated Depletion

The total amount of natural resource extraction charged as an expense over time to depreciate the asset's value.