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AE Model and the Multiplier
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AE Model and the Multiplier
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16. Deriving the Aggregate Expenditures Model / AE Model and the Multiplier / Problem 3
Problem 3
How does the multiplier effect influence consumption patterns when there is an increase in government spending?
A
It only affects investment patterns, not consumption.
B
It decreases consumption as individuals save more of their income.
C
It leads to increased consumption as individuals receive more income and spend more.
D
It has no effect on consumption patterns.
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