The multiplier process can occur when a decrease in investment spending
A)Increases household saving,causing consumers to buy more goods and services.
B)Reduces household incomes,causing consumers to buy fewer goods and services.
C)Increases household incomes,causing consumers to buy fewer goods and services.
D)Reduces household incomes,causing consumers to buy more goods and services.

Question

Quizplus · Accepted Answer

The multiplier process occurs when a decrease in investment spending reduces household incomes, causing consumers to buy fewer goods and services. This reduction in consumer spending further reduces income and leads to a decrease in overall economic activity. This process can continue until a new equilibrium is reached at a lower level of output and income.

The Multiplier Process Can Occur When a Decrease in Investment