The difference between the multiplier effect and the fiscal policy reaction is that the multiplier effect:
A)measures the effect of a change in taxes on aggregate expenditure, whereas the fiscal policy reaction measures the change in interest rates in the economy.
B)is seen only with changes in interest rates, whereas the fiscal policy reaction is seen only with changes in government expenditure.
C)links increases in government expenditure to higher future output, whereas the fiscal policy reaction links lower future output to higher government expenditure.
D)links increases in government expenditure to higher future output, whereas the fiscal policy reaction links lower future output to lower interest rates.

Question

Quizplus · Accepted Answer

The Answer of The difference between the multiplier effect and the fiscal policy reaction is that the multiplier effect:
A)measures the effect of a change in taxes on aggregate expenditure, whereas the fiscal policy reaction measures the change in interest rates in the economy.
B)is seen only with changes in interest rates, whereas the fiscal policy reaction is seen only with changes in government expenditure.
C)links increases in government expenditure to higher future output, whereas the fiscal policy reaction links lower future output to higher government expenditure.
D)links increases in government expenditure to higher future output, whereas the fiscal policy reaction links lower future output to lower interest rates.

The Difference Between the Multiplier Effect and the Fiscal Policy