When There Are Few Unemployed Resources, Additional Spending Will Tend

question 70

Multiple Choice

When there are few unemployed resources, additional spending will tend to

• A) flow directly to the unemployed resources, so that the multiplier can be maintained at 1/1-mpc.
• B) increase the marginal propensity to consume, and thereby increase the size of the multiplier.
• C) increase the demand for resources and drive prices downward, increasing the size of the multiplier.
• D) bid resources away from other activities and drive prices upward, reducing the size of the multiplier.