Question

g The multiplier effect states that there are additional shifts in aggregate demand from fiscal policy, because it a. decreases income and thereby increases consumer spending. b. reduces investment and thereby increases consumer spending. c. increases income and thereby increases consumer spending. d. increases the money supply and thereby reduces interest rates.

Answer 1

c. increases income and thereby increases consumer spending.

Step-by-step explanation:

The multiplier effect is the additional shifts in aggregate demand that results when expansionary fiscal policy increases income and thereby increases consumer spending. It applies to any component of GDP.