What is the multiplier effect and when do multiplier effects occur?
What will be an ideal response?
The multiplier effect is a series of induced increases (or decreases) in consumption spending that results from an initial increase (or decrease) in autonomous expenditures. The multiplier effect amplifies the effect of economic shocks on real GDP. Multiplier effects occur whenever there is a change in autonomous expenditures, which is spending that does not depend on income.
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Which of the following is a component part of investment spending?
A) the purchase of a new microwave by a fast food restaurant B) the purchase of 500 shares of corporate stock C) the sale of 500 shares of corporate stock D) all of the above
Starting with an exchange rate of $1 = ¥110, and a price tag of ¥5,000 for a Japanese good, what happens to the dollar price of the good if the yen depreciates by 4 percent?
A) the dollar price of the good rises from $45.45 to $47.72 B) the dollar price of the good falls from $45.45 to $43.64 C) the dollar price of the good falls from $550,000 to $522,500 D) the dollar price of the good rises from $550,000 to $577,500 E) ?the dollar price of the good rises falls from $450 to $427.50