Multiplier and Spending Quiz

What does the multiplier help economists conceptualize?

• That a change in autonomous expenditure will result in a less than proportional change in the equilibrium level of national income.

• That a change in autonomous expenditure will result in a more than proportional change in the equilibrium level of national income.

• That a change in autonomous expenditure will have no effect on the equilibrium level of national income.

• That a change in autonomous expenditure will result in an equal change in the equilibrium level of national income.

What does the multiplier show us about spending?

• It shows us how spending decreases throughout the economy and reduces income for others.

• It shows us how spending remains constant throughout the economy and has no effect on income for others.

• It shows us how spending ripples throughout the economy and creates income for others.

• It shows us how spending increases only for the initial spender and does not affect others.

What does the multiplier process begin with?

• An increase in aggregate supply (AS)

• A decrease in aggregate demand (AD)

• An increase in aggregate demand (AD)

• A decrease in aggregate supply (AS)

What is the result of an increase in aggregate demand (AD)?

• A decrease in production and income

• An increase in the same amount of production and income

• A decrease in consumption

• An increase in savings only

What happens to the extra income generated from the multiplier process?

• It is entirely saved

• It is entirely spent on consumption

• Some of it is spent on consumption and some is saved

• It is used to pay off debts

What does the induced increase in consumption spending result in?

• A decrease in aggregate demand

• A further increase in aggregate demand, production, and income

• A decrease in production and income

• A decrease in savings

What happens to the income multiplier when the Marginal Propensity to Consume (MPC) is lower?

• A) It becomes more powerful

• B) It becomes less powerful

• C) It remains unchanged

• D) It becomes negative

What effect do higher leakages have on the income multiplier?

• A) They make the income multiplier more powerful

• B) They make the income multiplier less powerful

• C) They have no effect on the income multiplier

• D) They make the income multiplier negative

Why is the size of the income multiplier important?

• A) To determine the impact of a change in Aggregate Demand (AD) on the level of Ye

• B) To calculate the total income of a country

• C) To measure the inflation rate

• D) To determine the interest rates

What is another term for aggregate supply?

• Total demand

• Total output

• Total consumption

• Total expenditure