The multiplier effect is the multiplied impact on
A)the money supply of a given increase in government purchases.
B)tax revenues of a given increase in government purchases.
C)investment of a given increase in interest rates.
D)aggregate demand of a given increase in government purchases.

Question

Quizplus · Accepted Answer

The multiplier effect refers to the magnified impact on aggregate demand when there is an initial increase in government purchases. This occurs because the increase in government spending stimulates spending by households and businesses, resulting in a multiplied effect on the economy. Therefore, the correct choice is D.

The Multiplier Effect Is the Multiplied Impact on