The Basic Reason for the Multiplier Effect Is That When

question 127

Multiple Choice

The basic reason for the multiplier effect is that when you spend money,

• A)another person receives income.
• B)another person must pay for it.
• C)your money balances are reduced.
• D)your net worth decreases.

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Definitions:

Credit Column

Refers to the right side of a ledger account where entries serve to increase liabilities, revenues, or equity and decrease assets or expenses.

Accounting Cycle

The collective process of recording and processing the accounting events of a company, from when the transaction occurs, to its inclusion in the financial statements.

Financial Statements

Consolidated documents presenting the financial status, performance, and cash flows of a company, primarily comprising the balance sheet, income statement, and statement of cash flows.

Working Paper

Documents that record the detailed information and procedures used in an audit or financial analysis, serving as the basis for conclusions.