Which of the following scenarios shows the multiplier at work?
A)The government estimates that GDP is expected to fall in the near future, so the government decides to increase expenditure now to boost GDP.
B)You decide to save money and begin shopping around for lower priced items. You then proceed to buy only those items that are on sale.
C)The government builds a new highway, which costs $35 billion. The construction company and the workers are paid and spend some of the money on buying goods and services from grocery stores and department stores. The grocery store employees and the department store employees then are paid and purchase more goods and services.
D)You decide to work fewer hours per week, so your income falls.

Question

Quizplus · Accepted Answer

The construction of the new highway creates a chain reaction of spending as the money paid to workers and companies is then spent in other businesses, creating a multiplier effect on the economy.

Which of the Following Scenarios Shows the Multiplier at Work