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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.

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