In a recent study, the University of Underfunded argued that it created four times as many jobs as people that it hired directly. This argument illustrates the idea
A)of the marginal propensity to consume.
B)of the multiplier.
C)of government spending.
D)of the tax multiplier.
E)that universities are wasting taxpayers' dollars.

Question

Quizplus · Accepted Answer

The idea of creating more jobs than direct hires is related to the multiplier effect, which is the concept that an initial increase in spending by one entity (in this case the University of Underfunded) can lead to a larger increase in overall economic activity. This occurs as the money spent eventually gets re-spent by others, creating a ripple effect. In this case, the University's spending created jobs not only for its direct hires, but also for those indirectly employed as a result of increased economic activity. Therefore, the answer is B, the multiplier.

In a Recent Study, the University of Underfunded Argued That