The Multiplier Effect Refers to the Fact That a Change

question 91

Multiple Choice

The multiplier effect refers to the fact that a change in spending (aggregate demand) will

• A) increase the money supply.
• B) cause prices to rise by some multiple of the initial increase in spending.
• C) cause nominal output to rise by some multiple of the initial increase in spending.
• D) reduce prices by some multiple of the increase in spending.

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Definitions:

Financial Calculator

A specialized calculator used to perform financial functions, such as calculating interest rates, payments, and investment values.

Time Periods

Time periods refer to specific lengths or intervals of time which are used for measuring, analyzing, or specifying durations, often within financial, managerial, or planning contexts.

Compound Interest

A method where interest is calculated not just on the initial amount invested or borrowed, but also on the interest that has been accumulated over previous periods, for either savings or loans.

Discount Rate

The rate of interest that is applied to find out the present value of cash flows predicted in the future, within the framework of discounted cash flow analysis.