If prices are fixed, an increase in aggregate expenditures results in an increase in equilibrium GDP that
A)has no necessary relationship to the size of the change in aggregate expenditure.
B)is equal to the change in aggregate expenditure.
C)is less than the change in aggregate expenditure.
D)is greater than the change in aggregate expenditure.

Question

Quizplus · Accepted Answer

When prices are fixed, an increase in aggregate expenditures leads to a multiplied increase in equilibrium GDP due to the multiplier effect, making the change in GDP greater than the initial change in aggregate expenditure.

If Prices Are Fixed, an Increase in Aggregate Expenditures Results