The Size of the Multiplier Effect of Government Spending Is

question 39

Multiple Choice

The size of the multiplier effect of government spending is larger when

• A) saving is lower.
• B) export spending is higher.
• C) income taxes are higher.
• D) investment spending is lower.
• E) import spending is higher.

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Definitions:

Average Fixed Cost

Fixed cost divided by the level of output.

Producer Surplus

The gap between the price that suppliers are prepared to take for a product or service and the real price they get.

Perfectly Competitive

A market structure characterized by many buyers and sellers, homogeneous products, and free entry and exit, leading to optimal price and quantity.

Producer Surplus

The difference between what producers are willing to accept for a good or service versus what they actually receive, often due to market forces.