The multiplier concept is important because it shows:
A) why fiscal policy is always effective.
B) how small changes in government spending may have large impacts on overall output.
C) how changes in taxes are multiplied into larger government revenues.
D) why decreases in the tax rate may actually increase tax revenues overall.

Question

Quizplus · Accepted Answer

The multiplier concept shows how small changes in government spending can have a larger impact on overall output, indicating that fiscal policy can be effective in stimulating economic growth. It does not address the effectiveness of fiscal policy in all situations or the impact of tax changes on government revenues. The concept also does not suggest that decreases in the tax rate will always increase tax revenues overall.

The Multiplier Concept Is Important Because It Shows