The multiplier is greater than 1 because the change in autonomous expenditure leads to _ .
A) more saving
B) more induced expenditure
C) less consumption expenditure
D) more investment

Question

Quizplus · Accepted Answer

The multiplier effect occurs because any initial increase in autonomous expenditure (such as an increase in government spending or investment) leads to a larger increase in total spending. This is because the initial increase in spending leads to more income for individuals, which in turn leads to more spending by those individuals. This additional spending leads to even more income for others, and so on, creating a ripple effect throughout the economy. Therefore, the multiplier is greater than 1 because the initial increase in autonomous expenditure leads to more induced expenditure.

The Multiplier Is Greater Than 1 Because the Change in Autonomous