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Because of the multiplier effect, if a shock causes aggregate demand to increase by $200 million, then the government should _____ to restore the economy to its original growth rate.

Respuesta :

Because of the multiplier effect, if a shock causes aggregate demand to increase by $200 million, then the government should reduce government spending by less than $200 million and to restore the economy to its original growth rate.

What is multiplier effect?

  • An economic concept known as the multiplier effect describes the proportional increase or decrease in final revenue that happens as a result of a capital infusion or withdrawal.
  • In essence, it assesses the influence that a shift in economic activity—such as investment or spending—will have on a given object's overall economic output.
  • Generally speaking, economists are most curious about how capital infusions increase income.

The majority of economists are of the opinion that capital investments of any kind, whether made by governments or businesses, will have a significant snowball effect on numerous facets of economic activity.

Know more about multiplier effect with the help of the given link:

https://brainly.com/question/23530063

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