The Multiplier Principle Indicates That If Business Decision Makers Become

question 84

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 $50 billion,real GDP

• A)will increase by less than $50 billion if the economy was initially operating well below capacity.
• B)will increase by more than $50 billion if the economy was initially operating well below capacity.
• C)will increase by more than $50 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:

Exporter

A person, company, or country that sells goods or services to buyers in another country.

Silk

A natural fiber known for its luster and softness, produced by the larvae of silk moths, used in the manufacture of luxurious fabrics.

Price Taker

A firm or individual who accepts the prevailing prices in the market since they do not have the power to influence it.

Small Country

A nation with a smaller geographic area or population, often with less impact on global economic trends.