Answer:
The correct answer is option C.
Explanation:
The government builds a water-treatment plant. Workers are hired to build the plant. These workers earn factor incomes. These incomes are spent on buying goods and services. This further increases output level.
This increase in the output level or aggregate demand because of an increase in government spending represents the multiplier effect. Here an increase in the government will cause a more than proportionate increase in output because of the multiplier effect.
