The Multiplier Effect Suggests That

question 76

Multiple Choice

The multiplier effect suggests that:

• A) a ripple effect occurs from one person's initial spending.
• B) government spending $1 will create more than a $1 increase in GDP.
• C) a tax cut will increase GDP by more than the amount of the initial tax cut.
• D) All of these are true.

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Definitions:

Return on Investment

A performance measure used to evaluate the efficiency or profitability of an investment, calculated by dividing the net profit by the initial cost of the investment.

Increase in Income

An upward movement in earnings or revenue, signaling growth or improvement in financial performance.

Variable Cost

A cost that changes in proportion with the level of output or activity; in contrast to fixed costs, which remain constant regardless of activity.

Transfer Price

The price at which goods or services are transferred between departments or divisions within the same company.