Economists agree that the multiplier effect on real output is close to zero when:
A)inflation is very low.
B)the economy is at or near full employment.
C)the national debt is relatively small.
D)"shovel-ready" projects exist.

Question

Economists agree that the multiplier effect on real output is close to zero when:
A)​inflation is very low.
B)​the economy is at or near full employment.
C)​the national debt is relatively small.
D)​"shovel-ready" projects exist.

Quizplus · Accepted Answer

The multiplier effect is the amount by which an initial change in spending is magnified or multiplied to cause a larger change in GDP. When the economy is at or near full employment, any increase in spending will not result in an increase in output, as there are no available resources (such as labor) to produce additional output. Therefore, the multiplier effect is close to zero in this scenario.

Economists Agree That the Multiplier Effect on Real Output Is