The practical significance of the multiplier is that it:
A. equates the real interest rate and the expected rate of return on investment.
B. magnifies initial changes in spending into larger changes in GDP.
C. keeps inflation within tolerable limits.
D. helps to stabilize the economy.
B. magnifies initial changes in spending into larger changes in GDP.
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Suppose that real GDP is initially $14 trillion and the government attempts to increase real GDP to $15 trillion. The marginal propensity to consume is 0.8, and every $1.00 increase in real government spending crowds out $0
50 in real planned investment expenditures. Which increase in government spending below could yield the desired level of real GDP? A) $200 billion B) $125 billion C) $100 billion D) $400 billion
Which of the following is a commonly-cited benefit of advertising?
a. Advertising can be a signal of the quality of a product. b. Advertising impedes competition. c. Advertising reduces the deadweight loss associated with monopolistic competition. d. Advertising encourages free entry, which increases profits.