The multiplier effect suggests that:
A) a ripple effect occurs from one person's initial spending.
B) government spending $1 will create more than a $1 increase in GDP.
C) a tax cut will increase GDP by more than the amount of the initial tax cut.
D) All of these are true.

Question

Quizplus · Accepted Answer

The multiplier effect suggests that all of these options are true. A ripple effect occurs from one person's initial spending, government spending $1 will create more than a $1 increase in GDP, and a tax cut will increase GDP by more than the amount of the initial tax cut.

The Multiplier Effect Suggests That