In the equation Y = (1/1 - b + v)(a + I + G + X − u),the term (1/1 - b + v)is referred to as the
A)level of autonomous expenditures.
B)autonomous expenditure multiplier.
C)balanced budget multiplier.
D)tax multiplier.

Question

Quizplus · Accepted Answer

The term (1/1 - b + v) is referred to as the autonomous expenditure multiplier, which measures the change in equilibrium output (Y) in response to a change in autonomous expenditures (a, I, G, X, or u). It is called a multiplier because it magnifies the impact of autonomous expenditures on equilibrium output. Option A, the level of autonomous expenditures, refers to the total amount of autonomous expenditures in the economy and is not represented by this term. Option C, the balanced budget multiplier, refers to the change in equilibrium output resulting from an equal change in government spending and taxes, while option D, the tax multiplier, refers specifically to the impact of a change in taxes on equilibrium output.

In the Equation Y = (1/1 - B + V)(a