New Enroll in RBI Grade B New Batch - Starts on May 21

    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.
    A Only I Correct Answer Incorrect Answer
    B Only III Correct Answer Incorrect Answer
    C I & II Correct Answer Incorrect Answer
    D II & III Correct Answer Incorrect Answer
    E All of the above Correct Answer Incorrect Answer

    Solution

    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.

    Practice Next

    Relevant for Exams: