Economics • Economic BasicsMedium
What does the 'Multiplier Effect' in macroeconomics measure?
A. The proportionate change in aggregate income resulting from an initial injection of autonomous spending.✓ Correct Answer
B. The rate at which prices multiply during periods of hyperinflation.
C. The ratio of total tax collections to total national income.
D. The expansion of money supply relative to commercial bank deposits.
💡 Solution & Explanation
The multiplier effect measures the proportional change in national income generated by an autonomous shift in spending such as investment or government expenditure. It operates because one person spending money becomes income for another, triggering a chain reaction determined by the marginal propensity to consume. Alternative choices describe hyperinflation mechanisms or monetary aggregates rather than output generation.
More Economics Economic Basics questions
- Which of the following measurements is primarily utilized by the Directorate of Economics and Statistics in…
- What does the 'Lorenz Curve' graphically measure?
- In microeconomics, what does an 'Isoquant Curve' represent?
- What is the economic rationale behind utilizing the Lorenz curve and Gini coefficient in analyzing income…
- What is the primary economic consequence of imposing an effective binding price floor above the market…