According to the aggregate expenditure model, when autonomous expenditure increases, equilibrium expenditure
A)increases by a smaller amount.
B)does not change because autonomous expenditures has no effect on equilibrium expenditure.
C)increases by a larger amount.
D)increases by an equal amount.
E)does not change because only induced expenditures increase equilibrium expenditure.

Question

Quizplus · Accepted Answer

In the aggregate expenditure model, an increase in autonomous expenditure leads to a multiplied increase in equilibrium expenditure due to the multiplier effect.

According to the Aggregate Expenditure Model, When Autonomous Expenditure Increases