The Multiplier Effect Refers to the Fact That a Change

question 91

Multiple Choice

The multiplier effect refers to the fact that a change in spending (aggregate demand) will

• A) increase the money supply.
• B) cause prices to rise by some multiple of the initial increase in spending.
• C) cause nominal output to rise by some multiple of the initial increase in spending.
• D) reduce prices by some multiple of the increase in spending.

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Definitions:

Purpose

The purpose behind why something is done, created, or exists.

Petty Cash Fund

A small amount of cash on hand used for minor or incidental expenses within a business.

Journal Entries

Records of financial transactions within the accounting system of a business, showing the accounts affected and the amounts involved.

Reimburse

To pay back or compensate for money that has been spent or lost.