Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
It decreases overall economic output.
B
It has no effect on economic output.
C
It increases overall economic output.
D
It only affects government revenue.
Understanding the Answer
Let's break down why this is correct
Answer
The primary effect of an increase in government spending on the economy is that it can lead to a larger overall increase in economic activity, known as the multiplier effect. When the government spends money, it pays for goods and services, which means businesses receive more income. These businesses may then hire more workers or pay their current workers more, leading to increased spending by those workers in their communities. For example, if the government builds a new road, construction workers will earn money and spend it on things like food and clothing, which helps other businesses. This chain reaction means that the initial government spending creates more economic growth than the amount spent.
Detailed Explanation
When the government spends more money, it puts cash into the economy. Other options are incorrect because Some might think that spending less leads to better results; It's a common belief that spending has no impact.
Key Concepts
multiplier effect
Topic
Spending and Tax Multipliers
Difficulty
easy level question
Cognitive Level
understand
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