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tresset_1 [31]
3 years ago
15

The term multiplier effect refers to the fact that the u.s national debt is increasing every year

History
1 answer:
kvv77 [185]3 years ago
4 0

Answer: False

Explanation:

The multiplier effect is used to describe the effect that government spending has on an economy not the national debt increasing.

The multiplier aims to show how much the GDP of the country would increase by given an increase in government spending. It is calculated by the formula:

= 1 / (1 - Marginal Propensity to Consume)

Assuming this multiple is 5 for instance, if the U.S. government increased spending by $5 billion, GDP would be expected to increase by:

= 5 billion * 5

= $25 billon

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