At the Beginning of a Recession, the Expenditure Multiplier

question 7

Multiple Choice

At the beginning of a recession, the expenditure multiplier

• A) offsets the initial cut in autonomous expenditure and slows the recession.
• B) reinforces the initial cut in autonomous expenditure and adds force to the recession.
• C) offsets the initial cut in autonomous expenditure and reverses the recession.
• D) reinforces the initial cut in autonomous expenditure and reverses the recession.
• E) has no effect on the recession.

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Definitions:

Average Variable Cost

The total variable cost divided by the quantity of output produced, representing the variable cost per unit of output.

Short-run Supply

The amount of output that producers are willing and able to sell at different prices over a short period of time, often assuming some inputs are fixed.

State License Fee

A fee required by certain state governments for the granting of a license to operate a particular business or profession within that state.

Short Run

A time period in which at least one input, such as capital equipment, is fixed, limiting the adjustments a firm can make to production levels.