During Normal Times, the Multiplier Effect of an Increase in Government

question 10

Multiple Choice

During normal times, the multiplier effect of an increase in government spending financed by taxes will be

• A) strengthened, if the additional spending flows into sectors of the economy where the unemployment rates are low.
• B) weakened by an offsetting reduction in spending due to the higher taxes.
• C) unaffected, as long as the higher taxes are in the future.
• D) strengthened, if corporate tax rates are increased and personal tax rates remain unchanged.

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Definitions:

Principled

Acting in accordance with morality and showing recognition of right and wrong.

Disrupt

To interrupt by causing a disturbance or problem, significantly altering or destabilizing the status quo.

Ingroup Minority

A smaller subset within a larger group that may hold different views or characteristics from the majority of the group.

Leniency Contract

An informal agreement where one person agrees to treat another person more leniently or forgivingly than the situation may warrant.