Multipliers Amplify an Initial Shock

question 143

Multiple Choice

Multipliers amplify an initial shock.When do multiplier effects take place?

• A) During recessions only
• B) During expansions only
• C) During both recessions and expansions
• D) During both recessions and expansions, but only if the economy is not at full employment

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Definitions:

The Classicals

A group of economists in the late 18th and early 19th centuries who believed in free markets, free trade, and limited government intervention in the economy.

Full Employment

A situation in an economy where all available labor resources are being used in the most economically efficient way.

John Maynard Keynes

A British economist whose ideas fundamentally changed the theory and practice of macroeconomics and the economic policies of governments, known for advocating increased government expenditures and lower taxes to stimulate demand and pull the global economy out of depression.

Classical Economists

A group of economists from the 18th and 19th centuries, including figures like Adam Smith and David Ricardo, who focused on the ideas of free markets and economic growth.