When the Multiplier Is Included in the IS Curve

question 103

Multiple Choice

When the multiplier is included in the IS curve:

• A) a demand shock has a larger impact on short-run fluctuations than with the standard IS curve.
• B) it has no impact on potential output.
• C) a demand shock has a smaller impact on short-run fluctuations than with the standard IS curve.
• D) a change in taxes has no impact on short-run output.
• E) None of these answers is correct.

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Definitions:

Attributed Ownership

The assignment of ownership interest in a company or property, often for the purpose of determining control or tax responsibilities.

Intra-Entity Gain

A gain recognized when transactions occur within segments of the same company, not usually recognized for external reporting purposes until realized with an external party.

Annual Amortization Expense

The portion of the cost of an intangible asset that is expensed through an organization's income statement each year over the asset's useful life.

Consolidated Tax Return

A tax return that combines the tax liability of all subsidiary companies with that of a parent company, treating them as one entity for tax purposes.