The multiplier effect occurs becauseA) as saving levels increase,a greater pool of loanable funds is available for investment spending by businesses.B) increases in income cause a chain reaction of spending by many businesses and individuals.C) increases in income cause tax revenues to increase,thereby stimulating increases in government spending levels.D) businesses copy the spending decisions of their competitors.E) households tend to spend any increase in income.

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Aquan Payne · Accepted Answer

Final Answer : B, Explanation :  The multiplier effect refers to the chain reaction of spending that occurs when an initial increase in income leads to increased spending by individuals and businesses, who in turn generate more income and further increase their own spending. This cycle continues and leads to a larger overall increase in economic activity than the initial increase in income. Choices A, C, D, and E do not accurately describe the multiplier effect.

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