#1
What is the Economic Multiplier Concept?
A theory that explains how initial spending leads to increased economic activity
ExplanationExplains how initial spending boosts economic activity.
#2
Which of the following is NOT a type of economic multiplier?
Import-Export Multiplier
ExplanationImport-Export Multiplier is not a type of economic multiplier.
#3
Which of the following accurately describes the concept of the marginal propensity to consume (MPC)?
It represents the proportion of additional income that households consume.
ExplanationMPC: proportion of additional income that households consume.
#4
What is the role of government spending in the multiplier effect?
Government spending increases the multiplier effect.
ExplanationGovernment spending increases the multiplier effect.
#5
What is the formula for the investment multiplier?
1 / (1 - MPC)
ExplanationInvestment multiplier formula: 1 / (1 - MPC).
#6
Which of the following factors affects the size of the fiscal multiplier?
The elasticity of aggregate demand
ExplanationFiscal multiplier size influenced by aggregate demand elasticity.
#7
What is the difference between the expenditure multiplier and the tax multiplier?
Expenditure multiplier measures the effect of changes in government spending, while tax multiplier measures the effect of changes in taxes.
ExplanationExpenditure multiplier for government spending, tax multiplier for tax changes.
#8
Which of the following is NOT a limitation of the multiplier concept?
Assumption of no government intervention
ExplanationNo government intervention is not a limitation.
#9
In a closed economy, the expenditure multiplier formula is:
(1 + MPC) / (1 - MPC)
ExplanationExpenditure multiplier formula in a closed economy: (1 + MPC) / (1 - MPC).
#10
What is the relationship between the marginal propensity to consume (MPC) and the size of the fiscal multiplier?
Higher MPC leads to a larger fiscal multiplier
ExplanationLarger fiscal multiplier with higher MPC.
#11
How does the accelerator effect relate to the multiplier effect?
The accelerator effect amplifies the multiplier effect.
ExplanationAccelerator effect amplifies multiplier effect.
#12
Which of the following is an example of an external shock that can affect the size of the multiplier?
Global financial crisis
ExplanationGlobal financial crisis as an external shock affecting the multiplier.
#13
What is the paradox of thrift in relation to the multiplier concept?
It states that increased saving leads to a decrease in aggregate demand and can worsen economic downturns.
ExplanationParadox of thrift: increased saving worsens economic downturns.
#14
What happens to the multiplier effect in an open economy compared to a closed economy?
It is smaller in an open economy.
ExplanationMultiplier effect is smaller in an open economy.