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:

Liquidity

The ease with which an asset can be converted into cash without affecting its market price.

Net Income

The net income of a company once all costs and taxes are subtracted from its total revenues.

Solvency Measure

Financial metrics used to assess a company's ability to meet its long-term obligations and its financial stability.

Fixed Assets

Long-term tangible assets that are used in the operations of a business and are not expected to be consumed or converted into cash in the short term.