The Spending Multiplier Is

question 20

Multiple Choice

The spending multiplier is

• A) a formula to determine the total impact on savings from an initial change of a given amount.
• B) a formula to determine the total impact on consumption from an initial change of a given amount.
• C) only used when government spending increases.
• D) a formula to determine the total impact on spending from an initial change of a given amount.
• E) only used when government spending decreases.

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Definitions:

Capital Goods

Physical assets that a company uses in the production process to manufacture products and services that consumers will later use.

Opportunity Cost

Giving up possible benefits from other solutions when a single solution is chosen.

Economic Growth

The increase in the inflation-adjusted market value of the goods and services produced by an economy over a period of time.

Entrepreneurship

The act of creating, organizing, and running a new business venture, typically characterized by risk-taking and innovation to achieve profit and growth.