The government spending multiplier is likely to be larger during periods of

Question

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The government spending multiplier is likely to be larger during periods of low output and high unemployment. This is because during times of low output and high unemployment, there is a lot of excess capacity in the economy, meaning that an increase in government spending will not lead to an increase in prices and inflation. Rather, the extra spending will lead to an increase in economic activity which will in turn create jobs and reduce unemployment. Additionally, during this time, people are likely to spend the additional income they receive from the government, which will further stimulate economic growth. Therefore, a larger multiplier effect is likely to be seen during periods of low output and high unemployment.

The Government Spending Multiplier Is Likely to Be Larger During