An initial increase in government spending of $100 billion can create more than $100 billion of spending throughout the economy by what economists call the __________ effect.

Question

BlackTom AI · Accepted Answer

The question asks about the effect where an initial rise in government spending of $100 billion leads to a larger total increase in overall spending. 
Option 1: 'spending boost' — while this phrase describes an increase in spending, it is not the established term economists use to describe the ripple effect of an initial expenditure increase through the economy. It lacks technical specificity. 
Option 2: 'duplication' — this term implies repeating or copying something, which does not capture the idea of a magnified economic impact from a multiplier effect, so it misstates the mechanism. 
Option 3: 'accelerator' — the accelerator concept relates to how changes in investment respond to changes in the rate of economic growth, not to how government spending translates into a multiplied overall expenditure. It describes a separate channel, not the direct spending multiplier. 
Option 4: 'augmentation' — while augmentation suggests an increase, it is not the standard name for the process by which initial spending creates additional rounds of spending in the economy. It’s not the conventional term used in macroeconomics for this concept. 
Option 5: 'multiplier' — this is the standard term for the process in which an initial government spending increase leads to a greater total increase in aggregate demand and economic activity, due to repeated rounds of spending and re-spending of income throughout the economy. It captures the core idea of spending cascades and induced consumption.
Thus, evaluating the options against the formal concept, the remaining choice that correctly names the mechanism is the multiplier.

2254 ECON 0103 SEC2020 ECON 103 Homework 7

An initial increase in government spending of $100 billion can create more than $100 billion of spending throughout the economy by what economists call the __________ effect.

View Explanation

Log in for full answers

Similar Questions

In theory, an initial injection of spending of $1 million by a government can result in an increase in real Gross Domestic Product (GDP) greater than $1 million due to

35. Refer to the figure. If the aggregate demand curve shifts from AD2 to AD1, the multiplier effect on real GDP will be a decrease from A. Q3 to Q1. B. Q2 to Q4. C. Q2 to Q1. D. Q3 to Q4.

55. If households in the economy save more of any extra income that they earn, then the multiplier effect will A. increase. B. decrease. C. be unaffected. D. become less than 1.0.

An increase in the MPC

Assume that MPC is the one you calculated in Question 5. Transfer payments increase by 40,000.00 units. As a result, the real GDP will change by [Fill in the blank], units.

Suppose the marginal propensity to consume is 0.75. If businesses become more optimistic about the future and raise their investment by $10, the short-run equilibrium output will _____ and consumption will _.

As contrasted to the mainstream view, Keynesian economists believe that ________ than mainstream economists believe.

More Practical Tools for Students Powered by AI Study Helper

Homework AI Solver

Stylized AI Paper Writer

Plagiarism Checker Assistant

Citation AI Academic Writing Tool

In-Class Translation Assistant

AI Note Generator

AI Quiz Answers

Past Exam Questions from University Test Bank

Smart Practice Assistant

Adaptive Practice

Making Your Study Simpler

2254 ECON 0103 SEC2020 ECON 103 Homework 7

An initial increase in government spending of $100 billion can create more than $100 billion of spending throughout the economy by what economists call the __________ effect.

View Explanation

Log in for full answers

Similar Questions

In theory, an initial injection of spending of $1 million by a government can result in an increase in real Gross Domestic Product (GDP) greater than $1 million due to

35. Refer to the figure. If the aggregate demand curve shifts from AD2 to AD1, the multiplier effect on real GDP will be a decrease from A. Q3 to Q1. B. Q2 to Q4. C. Q2 to Q1. D. Q3 to Q4.

55. If households in the economy save more of any extra income that they earn, then the multiplier effect will A. increase. B. decrease. C. be unaffected. D. become less than 1.0.

An increase in the MPC

Assume that MPC is the one you calculated in Question 5. Transfer payments increase by 40,000.00 units. As a result, the real GDP will change by [Fill in the blank], units.

Suppose the marginal propensity to consume is 0.75. If businesses become more optimistic about the future and raise their investment by $10, the short-run equilibrium output will _____________________ and consumption will _________________.

As contrasted to the mainstream view, Keynesian economists believe that ________ than mainstream economists believe.

More Practical Tools for Students Powered by AI Study Helper

Making Your Study Simpler

Suppose the marginal propensity to consume is 0.75. If businesses become more optimistic about the future and raise their investment by $10, the short-run equilibrium output will _____ and consumption will _.