Multiplier

### What does a gross rent multiplier (GRM) of 8 signify for a property rental income of $15,000 per year? - [ ] The property cannot be sold more than $120,000. - [ ] The property can be sold exactly at $150,000. - [x] The property can be sold for $120,000. - [ ] The property is valued at $15,000 annually. > **Explanation:** A GRM of 8 means the property’s sale price should be 8 times the annual rental income. Therefore, $15,000 rent × 8 = $120,000. ### What is the function of the keynesian multiplier in economic theory? - [x] To measure the effect of investment spending on total income. - [ ] To evaluate company stock prices. - [ ] To determine rental property values. - [ ] To compute bank reserve requirements. > **Explanation:** The keynesian multiplier calculates how initial investment can affect total income levels within an economy. ### How is the deposit multiplier primarily used in banking? - [ ] To determine the value of rental property. - [ ] To predict population growth based on job creation factors. - [x] To measure how changes in bank reserves affect the total money supply. - [ ] To calculate earnings per share for businesses. > **Explanation:** The deposit multiplier helps in understanding changes in the money supply by focusing on bank reserve alterations and corresponding credit creation. ### Which of the following actions could increase the value calculated using the investment multiplier? - [x] Boosting initial investment spending. - [ ] Reducing the number of jobs in the area. - [ ] Increasing bank reserve requirements. - [ ] Decreasing property rental rates. > **Explanation:** Increasing the initial investment leads to heightened total income effects calculated through the investment multiplier. ### What is the primary calculation required to determine the gross rent multiplier? - [ ] Gross income divided by operating expenses. - [x] Property sale price divided by annual gross rental income. - [ ] Net operating income divided by property value. - [ ] Annual gross rental income multiplied by 2. > **Explanation:** The gross rent multiplier is derived by dividing the property's sale price by its annual gross rental income. ### What does a population multiplier strive to estimate? - [ ] The expansion of rental property values. - [x] The increase in population due to job additions. - [ ] The growth of stock market prices. - [ ] Changes in bank reserve ratios. > **Explanation:** The population multiplier helps estimate how an increase in jobs can influence the population growth within a region. ### In what scenario would a deposit multiplier be beneficial? - [ ] When estimating total company's earnings. - [ ] When assessing long-term investment growth. - [x] When analyzing the impact of reserve changes on credit. - [ ] When determining rental yields for properties. > **Explanation:** The deposit multiplier is beneficial for understanding the relationship between bank reserves shifts and the corresponding changes in overall credit. ### What happens to the investment multiplier effect if consumer spending propensity increases? - [x] The multiplier effect strengthens. - [ ] The multiplier effect diminishes. - [ ] The credit supply decreases. - [ ] The property values increase. > **Explanation:** Higher consumer spending propensity amplifies the investment multiplier effect, increasing total income and consumption. ### Which of the following represents a potential pitfall of relying on multipliers? - [ ] They increase credit supply dramatically. - [ ] They directly affect property values. - [x] They rely on assumptions that may not always hold true. - [ ] They are ineffective in banking contexts. > **Explanation:** Multipliers depend on certain assumptions for accurate prediction, which may not always remain applicable, leading to potential inaccuracies. ### Why are multipliers critical for policy-making decisions? - [ ] They assist in measuring individual property values precisely. - [ ] They help reduce total government expenditure. - [x] They offer predictive insights into economic impacts caused by changes in spending, taxes, etc. - [ ] They ensure no variations in bank reserves. > **Explanation:** Multipliers provide valuable predictive insights necessary for forming fiscal and monetary policies effectively, aiding in economic control measures.