Exploring Multiplier Increase in I

What does the multiplier effect in economics describe?

• The amplification of initial investment into a larger increase in total economic output

• The reduction in total economic output due to increased taxes

• The direct proportionality between savings and investment

• The process by which government spending is reduced

What role does government spending play in the economy according to the Keynesian model?

• It has no significant impact on the economy

• It only affects the taxation levels without influencing spending

• It acts as an injection, increasing total spending, output, and income

• It decreases the total economic output and income

How does an increase in income tax affect the economy?

• Stimulates private investment

• Enhances the multiplier effect

• Leads to a decrease in total spending, output, and income

• Increases disposable income and consumption

What is the paradox of thrift?

• An increase in savings leads to increased investment

• Saving more leads to an overall decrease in savings across the economy

• Higher savings directly correlate with higher government spending

• Savings have no impact on the economic output

What is necessary to achieve full employment according to the Keynesian goods market model?

• Increase in total spending to boost production and employment

• Strict control over imports and exports

• Reduction in taxes only

• Decrease in government spending

What happens to the multiplier when a 10% income tax is introduced?

• It increases

• It decreases

• It remains unchanged

• It doubles

How does an increase in government spending affect the economy according to the Keynesian model?

• No impact on employment

• Increases output and income

• Reduces government spending

• Decreases total spending

What is the effect of reducing income tax on household disposable income?

• Decreases disposable income

• Shifts income to government

• Increases disposable income

• No change to disposable income

What role do exports play in a country's economy?

• They are an injection of income

• They represent a leakage

• They have no impact

• They decrease total spending

What is the primary purpose of the Consumer Price Index (CPI)?

• To track changes in the price level of a consumer goods basket over time

• To calculate the government budget

• To measure individual product prices

• To determine the export rates