Which one of the following statements is accurate in explaining the expenditure multiplier effect? -A cash...

Which one of the following statements is accurate in explaining the expenditure multiplier effect?

-A cash infusion into an economy has a larger impact than an increase is spending.

-There is no impact from an increase in spending.

-A cash infusion has less of an impact on an economy than an increase in spending.

Expert Solution

Option 3

A cash infusion has less of an impact on an economy than an increase in spending

A cash benefit has less impact than an increase in spending as the first cash impact is not recorded in the GDP because cash transfers are not part of GDP but the spending is a part of GDP so the spending has a large effect than the cash infusion.

Rahul Sunny answered 2 years ago

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