Question

When demand falls for durable goods such as houses, furniture, appliances and cars, workers who produce those goods tend to lose jobs and income, and a multiplier effect occurs. The meaning of the term multiplier effect is that

Group of answer choices

A) demand for nondurable goods increases and more workers are hired in these industries.

B) laid-off workers spend less, which reduces demand and therefore jobs in other industries.

C) the government multiplies its spending to compensate for the fall in demand in durable-goods industries.

D) the Federal Reserve System increases the money in circulation in order to increase demand.

Answer 1

The multiplier effect occurs when an initial change in spending leads to additional spending and income, thus affecting GDP. In the scenario of falling demand for durable goods, it refers to reduced spending by laid-off workers, subsequently reducing demand and jobs in other sectors.

Step-by-step explanation:

The term multiplier effect refers to the phenomenon where an initial change in aggregate demand leads to a subsequent series of effects that are greater in total than the original event. In the context of the question, the correct answer is:

B) laid-off workers spend less, which reduces demand and therefore jobs in other industries.

The multiplier effect occurs because one person's spending becomes another person's income, which in turn can be spent, creating a cycle of additional spending and income. This effect influences real GDP and operates in both positive and negative directions. When demand for durable goods falls and workers in those industries lose jobs, they have less income to spend on other goods and services, leading to further decreases in demand across the economy.

Answer 2

The answer is B your welcome