The multiplier effect is exemplified by 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 idea that a given increase in government purchases can have a multiplied impact on aggregate demand. This is because the increase in government spending leads to an increase in income and consumption, which in turn leads to further increases in demand and economic activity. The multiplier effect is not related to the money supply or tax revenues, and although investment can also have a multiplier effect, that is not what is being exemplified in this question.

The Multiplier Effect Is Exemplified by the Multiplied Impact on