How Do the Multiplier Effect and the Crowding-Out Effect Change

question 123

Multiple Choice

How do the multiplier effect and the crowding-out effect change the consequences of an increase in government spending?

• A) They both amplify the consequences.
• B) They both diminish the consequences.
• C) The multiplier effect diminishes the consequences, while the crowding-out effect amplifies the consequences.
• D) The multiplier effect amplifies the consequences, while the crowding-out effect diminishes the consequences.

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Definitions:

Variable Manufacturing Overhead

Costs that fluctuate with the volume of manufacturing activity, including supplies, utilities, and indirect labor.

Labor Efficiency Variance

The difference between the actual number of labor hours worked and the standard hours expected to complete the work, multiplied by the standard labor rate.

Variable Overhead Efficiency Variance

The difference between the actual variable overhead incurred and the expected variable overhead based on the standard cost, attributed to efficiency in using resources.

Labor Efficiency Variance

The difference between the actual labor hours used and the standard hours expected for the production level achieved.