The multiplier shows that as _______ expenditure changes, real GDP changes by _______ amount.

Question

Quizplus · Accepted Answer

The multiplier effect in economics indicates that a change in autonomous expenditure (such as government spending, investment, or exports, which do not depend on the current income level) leads to an even larger change in real GDP. This is because the initial increase in spending cascades through the economy, generating additional income and spending in turn.

The Multiplier Shows That as _______ Expenditure Changes, Real GDP