An increase in the aggregate expenditures schedule:
A) Increases aggregate demand by the amount of the increase in aggregate expenditures only
B) Increases aggregate demand by the amount of the initial increase in aggregate expenditures times the multiplier
C) Decreases aggregate demand by the amount of the increase in aggregate expenditures
D) Decreases aggregate demand by the amount of the initial increase in aggregate expenditures times the multiplier

Question

Quizplus · Accepted Answer

An increase in the aggregate expenditures schedule leads to an increase in aggregate demand, and the size of this increase is determined by the multiplier effect. The multiplier indicates how much aggregate demand will change in response to a given change in aggregate expenditures. Therefore, the correct answer is B, which states that an increase in aggregate expenditures increases aggregate demand by the amount of the initial increase in aggregate expenditures times the multiplier.

An Increase in the Aggregate Expenditures Schedule