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

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Essay

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


Definitions:

Deadweight Loss

Net loss of total (consumer plus producer) surplus.

Common Property Rights

Legal rights to resources that are accessible to all members of a society or community, such as air, oceans, or wildlife.

Preservation

The act of maintaining or safeguarding something in its original or current state to prevent decay or destruction.

Efficient Outcome

A situation where resources are allocated in the most effective manner, leaving no room for improvement without making someone worse off.

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