Small changes in government spending can end up having larger changes on the overall growth rate of output.

Question

Quizplus · Accepted Answer

This is due to the multiplier effect, where a change in government spending leads to a change in income, which in turn leads to further changes in spending and income within the economy. As a result, a small change in government spending can end up having a larger impact on the overall growth rate of output.

Small Changes in Government Spending Can End Up Having Larger