Basically, an increase in nonincome-determined spending is subject to a multiplier effect because:
A) businesses take the new dollars coming into the spending stream and save them.
B) new dollars injected into the spending stream are spent over and over again as they change hands.
C) the government gives favorable tax treatment to dollars that are injected into the spending stream.
D) financial institutions pay high interest rates to those who have claims to new spending dollars.

Question

Quizplus · Accepted Answer

The multiplier effect occurs because new dollars injected into the spending stream are spent multiple times, creating a larger impact on the economy than the initial amount spent. This process amplifies the effects of the initial spending.

Basically, an Increase in Nonincome-Determined Spending Is Subject to a Multiplier