Because of the multiplier, a one- time change in expenditure will
A)have little secondary effect on real GDP.
B)decrease saving and investment activity and thereby decrease future real GDP.
C)expand real GDP by an infinite amount.
D)generate more additional real GDP than the initial change in expenditure.

Question

Quizplus · Accepted Answer

The multiplier effect implies that an initial change in spending will lead to a larger overall increase in real GDP, as the initial spending creates income for others, who then spend part of that income, further increasing GDP.

Because of the Multiplier, a One- Time Change in Expenditure