In the multiplier process, a decrease in spending
A) causes an increase in production and incomes, which leads to a further increase in spending.
B) causes a decrease in production and incomes, which leads to a further decrease in spending.
C) causes a decrease in prices and wages, which causes a further decrease in spending.
D) causes a decrease in production and incomes, which leads to an increase in spending.

Question

Quizplus · Accepted Answer

The multiplier process in economics suggests that a decrease in spending leads to a decrease in production and incomes, which then causes a further decrease in spending. This is because lower spending reduces demand for goods and services, leading to lower production needs and thus lower incomes, perpetuating a cycle of decreased economic activity.

In the Multiplier Process, a Decrease in Spending