The Multiplier Effect

question 86

Multiple Choice

The multiplier effect

• A) explains what causes a recession.
• B) explains what causes an expansion.
• C) explains how the economy recovers from a recession.
• D) reinforces the negative effects of any reduction in spending.
• E) has no impact on equilibrium expenditure.

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Definitions:

Industry Demand

The total demand for goods and services produced by a specific industry within a market.

Firm's Demand

The amount of a particular good or service that a firm wishes to purchase at various prices, reflecting the firm's input needs for production.

Industry Price

A term generally referring to the average or standard price of goods and services within a specific industry.

Perfect Competitor

A hypothetical firm in a perfectly competitive market, where it must accept the prevailing market price and cannot influence it.