The Multiplier Effect from an Increase in Government Spending Causes

question 257

Multiple Choice

The multiplier effect from an increase in government spending causes additional increases in aggregate demand through:

• A) a decrease in taxes.
• B) even more government spending.
• C) an increase in consumer spending.
• D) a decrease in interest rates.

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Definitions:

Trading

The act of buying, selling, or exchanging goods, services, or financial instruments within markets.

Loads

In finance, refers to fees or commissions charged by a mutual fund, which can be at the time of purchase (front-end load), time of sale (back-end load), or as an annual expense (level load).

Absolute Advantage

The ability of a party (country, company, individual) to produce a greater quantity of a good, product, or service than competitors using the same amount of resources.

Comparative Advantage

The ability of an individual, firm, or country to produce a good or service at a lower opportunity cost than competitors, leading to more efficient trade possibilities.