Which of the following statements is false?

Question

BlackTom AI · Accepted Answer

The question prompt is: 'Which of the following statements is false?' and it is a multiple-choice item.
However, the provided data for answer options is missing in the 'answer_options' field, so there are no alternative statements listed to evaluate directly against the prompt.
We do have an entry in the 'answer' field: 'c. The IS (fiscal) multiplier makes the economy less sensitive to changes in autonomous expenditure.' This appears to be a proposed option (likely option C) for the false statement.
Given standard macroeconomic theory, the IS (Investment-Savings) multiplier describes how changes in autonomous expenditure (such as government spending, investment, or autonomous consumption) affect equilibrium income. The fiscal multiplier concept generally implies that a change in autonomous spending leads to a multiplied (enhanced) change in national income, because one person’s spending becomes another person’s income, which then gets spent again, and so on. Therefore:
- The idea that the IS multiplier makes the economy more sensitive (i.e., amplifies the response) is consistent with the usual interpretation of a multiplier effect.
- The statement that it makes the economy less sensitive would run counter to the central premise of multipliers; it would be false under ordinary circumstances.
But without the other answer options to compare, we cannot definitively identify all false statements or confirm which one is labeled as false among a complete set.
If we treat the provided option as a candidate false statement, this specific claim is indeed incorrect because the multiplier tends to increase, not decrease, the sensitivity of the economy to autonomous expenditure changes.
Potential misconceptions to highlight:
- Confusing multiplier with marginal propensity to save or to consume, and assuming it dampens fluctuations.
- Thinking 'autonomous expenditure' changes are absorbed without amplification, which ignores the circular flow and induced consumption that generate the multiplier effect.
- Interpreting the multiplier as a fixed, one-to-one shift rather than a multiplied shift that depends on marginal propensities and openness of the economy.
In summary, given the standard interpretation, option stating that the IS (fiscal) multiplier makes the economy less sensitive to changes in autonomous expenditure is false because the multiplier typically increases sensitivity by amplifying the impact of autonomous spending changes on overall income. If you can provide the full set of answer options, I can explicitly compare each option and identify all false statements with detailed justification.

SESS0008_24-25 LSA - MCQ test (30 minutes)

Which of the following statements is false?

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