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.
Explanation: 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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