Let's look at a simple example—a new building construction program. Government money is spent on goods such as concrete and steel as well as paying workers.
What will be an ideal response?
This directly creates new aggregate demand. In addition, there are multiplier effects—construction workers will use their incomes to buy all kinds of consumer goods and services. The multiplier effects add to the original economic stimulus resulting from the government spending.
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If the required reserve ratio increases and the monetary base is unchanged, the value of the money multiplier will ________ and the value of the money supply will ________
A) decline; decline B) decline; increase C) increase; decline D) increase; increase
If a consumer receives 20 units of utility from consuming two candy bars, and 25 units of utility from consuming three candy bars, the marginal utility of the third candy bar is
A) 25 utils. B) 20 utils. C) 5 utils. D) unknown as more information is needed to determine the answer.