What is the "multiplier effect" in economics?

A A tax that multiplies over time

B An initial increase in spending leads to a larger increase in national income

C Inflation accelerating

D Interest rates rising rapidly

✓ Correct Answer: Option B

The multiplier effect occurs when an injection of spending creates a chain of additional spending, resulting in a larger overall increase in income.

💡 Why is B) the correct answer?

The correct answer to the question "What is the "multiplier effect" in economics?" is Option B: An initial increase in spending leads to a larger increase in national income.

The other options — A) A tax that multiplies over time, C) Inflation accelerating, D) Interest rates rising rapidly — are incorrect for this IB Exam Prep question. As explained above: The multiplier effect occurs when an injection of spending creates a chain of additional spending, resulting in a larger overall increase in income.

📚 About This IB Exam Prep Practice Question

This 3-level IB Exam Prep question from the Economics topic is part of BrainForge Quiz's free exam preparation library. Each question includes the correct answer and a detailed explanation to help you understand the underlying concept, not just memorize the answer.

How to use this page: Read the question above, consider all four options (A through D), then check the highlighted correct answer and explanation. For active timed practice, start a free IB Exam Prep practice test or use flashcards for spaced repetition review.

Practice IB Exam Prep Quizzes → Browse All Questions Study Flashcards

What is the "multiplier effect" in economics?

✓ Correct Answer: Option B

📚 About This IB Exam Prep Practice Question

Related IB Exam Prep Questions