ADAS

Question 1

mutiplier process

1) initial increase in AD (due to increase in C/I/G/(X-M)) will lead to an _________________
2) ___________ leads to further rise in _______ as more ________ are employed
3) this will cause households to increase their ____________
4) subsequent rise in ____________ will lead to a __________, which leads to_____________
5) thus, there is a ______________ in NY via the mutiplier effect
6) this process stops when _______________ equals to ______________

Answer 1

1) initial increase in AD will lead to an (increase in output and NY)
2) (increase in output) leads to further rise in (factor incomes) as more (FOP) are employed
3) this will cause households to increase their (consumption)
4) subsequent rise (in induced C) will lead to a (further rise in AD and hence NY), which leads to (further rounds of increases in induced C)
5) thus, there is a (more than proportionate increase) in NY via the mutiplier effect
6) this process stops when the (initial increase in AD (injections)) equals the (total increase in savings, taxes, and spending on imports (withdrawals))