The multiplier effect
A) is nonexistent in the Keynesian model.
B) has no effect if the cyclical deficit is positive.
C) magnifies small changes in spending into larger changes in output and income.
D) increases the MPC.

Question

Quizplus · Accepted Answer

The multiplier effect magnifies small changes in spending into larger changes in output and income, which is a key concept in the Keynesian model. It works by increased spending leading to increased income and consumption, which in turn leads to further increases in spending and income. It can have a significant positive impact on economic growth and job creation. The cyclical deficit and MPC are factors that can influence the effectiveness of the multiplier effect, but they are not directly related to its existence.

The Multiplier Effect