Which of the following is an example of the multiplier at work as a result of an

Question

Which of the following is an example of the multiplier at work as a result of an increase in consumption expenditures?
Consumers compete with the government by increasing their expenditures, causing businesses to increase their investments in order to satisfy the increased demand.
Consumption expenditures increase inflation, which reduces real incomes; consumer expenditures and investment decline, which reduces aggregate spending.
Households and businesses receive income from consumption expenditures; they spend a portion of this new income; these expenditures in turn generate income for other businesses and households, which in turn spend a portion of the new income, and so on.
Consumption expenditures stimulate investment in new plant and equipment in order to produce goods and services for the government, which provides jobs and increases incomes.

Explanation / Answer

Households and businesses receive income from consumption expenditures; they spend a portion of this new income; these expenditures in turn generate income for other businesses and households, which in turn spend a portion of the new income, and so on

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