Question
Which of the following Statements about Multiplier
Effect is/are True? I- When the government spends a rupee, overall income rises by a multiple (more than a rupee) II- Government spending will also encourage private investment and consumer spending. III- In multiplier effect, the Government bears huge losses on tax front.Solution
Explanation: When the government spends a rupee, overall income rises by a multiple (more than a rupee). Government spending will also encourage private investment and consumer spending. This is referred to as the multiplier effect.
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