Question

Mary's construction company receives a lucrative contract to build car ports on a U.S. Air force base. To celebrate she purchases a new sports car. The salesman of the car feels happy about his big sale and celebrates by going to the ballet with a date. A ballerino pays his rent. A landlord hires a plumber to install new toilets.
In this scenario what macroeconomic process is being described?

capitalism

equilibrium in the product market

recession

the multiplier process

Answer 1

Answer: Thee Multiplier Process

Explanation:

The Multiplier Effect is the change in income that results from a change in Expenditure.

Essentially it is the rise in income resulting from new injections of money.

Broadly speaking, injections can come from, Government Spending in the Economy, Investment by firms, Exports and the like.

Injections increase the flow of income as the text portrays as it translates to money going into someone else's hands which they use to do something that enables someone else to get paid and so on and so forth.

That is what happened in the text.

Mary got an injection from the US Government, this enabled a salesman to go on a date, which enables a Ballerino his rent .

An injection of extra income leads to more spending, which creates more income, and so on.

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