The Aggregate Demand Multiplier Effect Says That an Initial Increase

question 61

Multiple Choice

The aggregate demand multiplier effect says that an initial increase in expenditure plans leads to an induced

• A) increase in production expenditure.
• B) increase in exports.
• C) increase in consumption expenditure.
• D) decrease in the price level.
• E) increase in government expenditures on goods and services.

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Definitions:

Consumer Surplus

Consumer surplus is the difference between the total amount consumers are willing and able to pay for a good or service and the total amount they actually pay.

Tax Revenues

The income received by the government from taxes imposed on individuals and businesses, used to fund government activities and public services.

Deadweight Loss

A decrease in economic efficiency arising when a good or service fails to attain or cannot possibly attain equilibrium.

Deadweight Losses

Economic inefficiencies that occur when equilibrium in a market is not achieved or when market allocation of resources is not optimal, often due to externalities or government intervention.