If the Government Increases Its Spending, Which of the Following

question 21

Multiple Choice

If the government increases its spending, which of the following would tend to reduce the size of the multiplier?

• A) higher taxes for the finance of the additional spending
• B) higher interest rates as the result of additional borrowing to finance the spending
• C) the flow of the spending into sectors where the unemployment rate is low
• D) all of the above

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Definitions:

Inelastic Demand

A situation where the demand for a good or service changes little when its price changes, indicating consumers' lack of sensitivity to price adjustments.

Price Discrimination

Price discrimination involves selling the same product or service at different prices to different groups of consumers, often based on factors like age, location, or purchase quantity.

Producer Surplus

The difference between what producers are willing to accept for a good or service versus what they actually receive, representing their economic benefit.

Price Discrimination

A method where a single provider offers identical or nearly identical items or services at different price points in various markets.