The Reason for the Multiplier Effect Is That

question 74

Multiple Choice

The reason for the multiplier effect is that

• A)businesses make decisions about investment projects based on anticipated profits.
• B)one person's additional expenditure creates a new source of income for another person, and this additional income leads to still more spending.
• C)changes in government spending typically deepen recessions and exacerbate inflationary conditions in the economy.
• D)additional spending lowers the rate of interest and leads to further borrowing and spending.

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Definitions:

Net Method

An accounting technique where discounts for early payment are calculated and recorded as lower sales prices at the time of sale, in anticipation that discounts will be taken.

Periodic Method

An accounting method that records inventory purchases and sales periodically, typically at the end of an accounting period, instead of continuously.

Journal Entries

The method by which transactions are recorded in the general ledger in the form of debits and credits according to accounting rules.

Voucher

A voucher is a document that authorizes a payment and records details about it, acting as proof of the transaction for accounting purposes.