The simple spending multiplier understates the amount by which output changes.

Name: The simple spending multiplier understates the amount by which output changes.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

The simple spending multiplier accurately calculates the initial change in output that results from changes in spending, but it does not account for any additional rounds of spending that may occur as a result of this initial change. Therefore, it is an underestimate of the overall impact on output.

The Simple Spending Multiplier Understates the Amount by Which Output