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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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