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The ‘multiplier effect” means thatSelect one:a.A change in aggregate economic activity has an effect on spendingb.A change in spending has a greater effect on aggregate economic activityc.A change in spending has a proportionate effect on aggregate economic activityd.A change in spending has a smaller effect on aggregate economic activity

Question

The ‘multiplier effect” means thatSelect one:a.A change in aggregate economic activity has an effect on spendingb.A change in spending has a greater effect on aggregate economic activityc.A change in spending has a proportionate effect on aggregate economic activityd.A change in spending has a smaller effect on aggregate economic activity

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Solution

The "multiplier effect" refers to the concept that an initial change in spending (either an increase or decrease) will lead to a larger change in aggregate economic activity. This is because the initial change in spending will circulate through the economy, causing further spending and income changes.

So, the correct answer is:

b. A change in spending has a greater effect on aggregate economic activity.

This problem has been solved

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