To illustrate the ultimate impact of the multiplier process when investment spending falls,we should
A)Shift the AD curve rightward once.
B)Shift the AD curve leftward twice,once for the autonomous change and second for the multiplier effect.
C)Shift the AD curve leftward and then rightward.
D)Shift the AD curve leftward and then shift the AS curve leftward.

Question

Quizplus · Accepted Answer

The multiplier process magnifies the impact of an initial change in investment spending on total output. Therefore, if investment spending falls, the AD curve will shift leftward due to the autonomous change, and then shift leftward again due to the multiplier effect. Choosing option B, which represents two leftward shifts of the AD curve, captures this ultimate impact.

To Illustrate the Ultimate Impact of the Multiplier Process When