If the multiplier increases, injections into the spending stream should be:
A) more effective in stimulating economic activity.
B) less effective in stimulating economic activity.
C) unchanged in their effectiveness for stimulating economic activity.
D) more effective in stimulating economic activity during expansions and less effective during recessions.

Question

Quizplus · Accepted Answer

When the multiplier increases, it means that any initial injection into the economy will have a larger impact on the overall level of economic activity. This is because the multiplier effect describes how an initial increase in spending leads to further increases in income and consumption, amplifying the initial stimulus.

If the Multiplier Increases, Injections into the Spending Stream Should