The Multiplier Principle Indicates That If Business Decision Makers Become

question 111

Multiple Choice

The multiplier principle indicates that if business decision makers become more optimistic about the future and, as a result, increase their investment expenditures by $82 billion, real GDP

• A) will increase by less than $82 billion if the economy was initially operating well below capacity.
• B) will increase by more than $82 billion if the economy was initially operating well below capacity.
• C) will increase by more than $82 billion if the economy was initially operating at full-employment capacity.
• D) will decline if the marginal propensity to consume is less than 1.

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Definitions:

Prisoner's Dilemma

A situation in game theory where two individuals acting in their own self-interest do not produce the optimal outcome for either party.

Oligopolies

Market structures characterized by a small number of firms controlling a large majority of the market share and having significant impact on prices and production.

Pure Monopolies

Market structures characterized by a single seller that faces no competition, typically due to high barriers to entry.