PRC-3 · Chapter 15 · Question 15 of 44
Economist Paul Samuelson argued that the recurring, wave-like fluctuations of the business cycle (booms and recessions) are primarily driven by:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) The continuous interaction between the Multiplier and the Accelerator
Explanation
Samuelson's model explains business cycles as the dynamic interaction where multiplier-induced consumption triggers accelerator-induced investment, fueling booms until capacity constraints force a downturn.
More Multiplier and Accelerator MCQs
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- Q18The government attempts to use the multiplier effect to pull the economy out of a recession by building roads. However, there is a severe…
- Q19If an economy is heavily dependent on imports, meaning a massive portion of any new consumer income is immediately spent on foreign goods…
- Q20The government injects Rs. 1 billion to build a dam. The workers spend 80% of their wages, shopkeepers spend 80% of their new profits…
- Q21If the citizens of a country spend 75% of any new income they receive (Marginal Propensity to Consume = 0.75), what is the exact value of…