Why Might the Response of Far-Sighted Consumers Reduce the Multiplier

question 61

Essay

Why might the response of far-sighted consumers reduce the multiplier effect of an increase in government expenditures?

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Definitions:

Percentage Of Sales

Percentage of sales refers to key financial ratios or metrics expressed as a proportion of a company's sales, used for analysis or planning.

Percentage Of Sales

A financial ratio that compares a particular expense or income to the total sales, expressing the result as a percentage to analyze trends or performance.

Margin Of Safety

The difference between actual or projected sales and the break-even point, usually expressed in percentage terms, indicating the buffer against a loss.

Operating Leverage

The degree to which a firm can use fixed operating costs to magnify the effects of changes in revenue on its operating income.