What economic concept is illustrated when a rise in government spending boosts the income of certain individuals, who then use part of that income to buy more consumer goods?

Multiple choice question for Macroeconomic Policy Tools. Select an option, then review the explanation below.

Explanation

The scenario describes the multiplier effect, where increased government expenditure raises incomes, leading to additional consumer spending and further economic activity.

Practice related questions from the same subject.

1.Which of the following functions as an automatic economic stabilizer?
2.If the government raises its spending by Rs16 billion and the multiplier effect outweighs the crowding out effect, what will be the impact on the economy?
3.Which economic phenomenon is illustrated when higher government spending boosts income, shifts the demand for money to the right, increases interest rates, and consequently reduces investment?
4.What is the effect of an increase in the marginal propensity to consume (MPC) on the multiplier?
5.What is the immediate effect of a rise in government expenditure on the economy?

What economic concept is illustrated when a rise in government spending boosts the income of certain individuals, who then use part of that income to buy more consumer goods?

Explanation

More Macroeconomic Policy Tools MCQs