Question

The multiplier principle indicates that if business decision makers become more optimistic about the future and, as a result, increase their investment expenditures by $82 billion, real GDP a. will increase by more than $82 billion if the economy was initially operating at full-employment capacity. b. will decline if the marginal propensity to consume is less than 1. c. will increase by less than $82 billion if the economy was initially operating well below capacity. d. will increase by more than $82 billion if the economy was initially operating well below capacity.

Answer 1

From the multiplier principle if the business increases by 82 billion dollars they will increase by more than $82 billion if the economy was initially operating well below capacity. option d.

What is the multiplier principle?

The multiplier is the economic variable that when increased or changed would lead to changes in other economic factors.

If the business should have an increase of this amount then there should be a resultant increase of similar amount in the business.

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