The Multiplier Effect Suggests That

question 111

Multiple Choice

The multiplier effect suggests that:

• A) a ripple effect occurs from one person's initial spending.
• B) spending $1 will create more than a $1 increase in GDP.
• C) a tax cut will increase GDP by more than the amount of the initial tax cut.
• D) All of these are true.

---

Definitions:

Consumer Equilibrium

A state where an individual allocates their income in a way that maximizes their utility, considering the prices of goods and services and their personal preferences.

Indifference Curve

A graphical representation used in microeconomics to show combinations of goods among which a consumer is indifferent, reflecting their preferences.

Consumer Equilibrium

The point at which an individual consumer achieves the highest level of satisfaction, given their income constraints and the prices of goods and services.

Total Utility

The overall satisfaction or happiness a consumer receives from consuming a particular quantity of goods and services.