The Multiplier Effect Shows That a Change in Aggregate Spending

question 214

Multiple Choice

The multiplier effect shows that a change in aggregate spending

• A) causes output to move in the opposite direction.
• B) causes output to change even more than the change in aggregate spending.
• C) causes output to change by less than the change in aggregate spending.
• D) leaves output unaffected.

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Definitions:

Finished Goods Inventory

The stock of completed products that are ready to be sold but have not yet been sold to customers.

Direct Labor-Hours

The cumulative hours that employees, who are actively engaged in the production process or delivering a service, put in.

Raw Materials Cost

The total cost associated with acquiring raw materials that are necessary for manufacturing goods.

Accounts Receivable

Money owed to a company by its customers for goods or services that have been delivered but not yet paid for.