If the Value of the Multiplier Is Smaller, the Economy

question 21

Multiple Choice

If the value of the multiplier is smaller, the economy

• A)becomes less stable because automatic stabilizers have a larger impact.
• B)becomes more stable because automatic stabilizers have a larger impact.
• C)becomes more volatile because automatic stabilizers have a lesser impact.
• D)is subject to larger fluctuations because automatic stabilizers have no impact.

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Definitions:

Marginal Rate

The rate at which one variable changes as another variable changes by one unit, commonly used in the context of tax rates or marginal rate of substitution in economics.

Transformation

The process of changing the state, form, or structure of something, often seen in contexts ranging from technology to economics.

Production Possibility

Represents various combinations of amounts of two or more goods or services that can be produced within a given time period, with a given amount of resources, and with technology constraints.

Capital

Capital refers to financial assets or the financial value of assets, such as funds held in deposit accounts as well as the physical factors of production.