Which Statement About the Multiplier Is Correct

question 245

Multiple Choice

Which statement about the multiplier is correct?

• A) The spending multiplier can work to increase or to decrease equilibrium GDP.
• B) The spending multiplier exists only during economic expansions.
• C) The size of the spending multiplier is dictated by the amount of government spending.
• D) The value of the spending multiplier is the inverse of the marginal propensity to consume.

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Definitions:

Accounting Cycle

Set of activities involved in converting information and individual transactions into financial statements.

Accountants

Professionals who perform financial functions related to the collection, accuracy, recording, analysis, and presentation of a business, organization, or individual's financial operations.

Cash Flow Method

An accounting technique that tracks the movement of cash in and out of a business, crucial for understanding its liquidity.