# Multiplier and Accelerator MCQs | Economics

Multiplier effect - The number by which a change in investment must be multiplied to result in the final change of total output. ## Multiplier and Accelerator Economics

Multiplier effect – The number by which a change in investment must be multiplied to result in the final change of total output. Here on MCQs.club we have prepared Multiple Choice Questions (MCQs) on multiplier and accelerator economics that fully cover the difference between multiplier and accelerator, multiplier accelerator interaction, multiplier and accelerator effect/concept/interaction. These MCQs are useful for Competitive exams, Professional Accountancy exams and Business management exams.

1. Which of the following is true for Multiplier effect?
1. The number by which a change in investment must be multiplied to result in the final change of total output.
2. The concept proposes that an increase in private investment can increase output and employment, and a decrease in investment will cause it to contract.
3. The term multiplier is used to show that the spending done to boost investment has an amplified effect on output.
4. All of the above
1. Which of the following is true for Marginal rate of tax on income?
1. The percentage of income that is paid to the government in the form of tax.
2. It is also known as the marginal propensity of tax (MPT)
3. Both A&B
4. None
1. The percentage of income that is used to buy goods and services outside of the domestic economy is called Marginal propensity to import (MPM).
1. True
2. False
1. Factors and assumptions underlying Multiplier effect include:
1. Marginal Propensity to Consume – How much of income generated through the investment will be spent on other goods and services in the economy.
2. Tax rate – How much of this income will be returned to the government in the form of tax.
3. Fall in the aggregate demand
4. All of the above
1. The limitations of Multiplier effect include:
1. Elasticity of supply – despite an equal increase in aggregate demand, the overall effect on output is not the same.
2. Time lag – i.e. when the initial investment will be made, and when the full effects of the multiplier will be felt.
3. Both A&B
4. None
1. In an open economy, the value of the multiplier depends on:
1. The marginal propensity to save
2. The marginal propensity to import
3. The level of taxes
4. All of the above
1. Which of the following is true for Accelerator effect?
1. Investment levels in an economy are positively related to a change in the rate of GDP
2. It looks at what effect a change in the level of output will have on the rate of investment.
3. If output increases, then firms will have to invest more in order to maintain a higher output.
4. All of the above

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