Because of the Multiplier, a One-Time Change in Expenditure Will

question 132

Multiple Choice

Because of the multiplier, a one-time change in expenditure will

• A) have little secondary effect on real GDP.
• B) expand real GDP by an infinite amount.
• C) generate more additional real GDP than the initial change in expenditure.
• D) decrease saving and investment activity and thereby decrease future real GDP.

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Definitions:

Equity

The principle of fairness and impartiality, often applied in the context of law, finance, and social justice.

Psychological Exchange Theory

A social psychology concept suggesting that interpersonal relationships are formed and maintained based on perceived rewards and costs, mutual benefits, and fairness.

Social Exchange Theory

A theory that suggests human relationships are formed by the use of a subjective cost-benefit analysis and the comparison of alternatives.

Social Contagion

Imitative behavior involving the spread of behavior, emotions, and ideas.