The multiplier effect is the increase in AD when private spending augments the effect of expansionary fiscal policy.

Question

Quizplus · Accepted Answer

The multiplier effect refers to the idea that an increase in government spending or investment will lead to an increase in overall economic output, as the initial spending stimulates further spending through a chain reaction. This is especially true when private spending also increases as a result of the policy, as it amplifies the overall impact on aggregate demand (AD). Therefore, statement "The multiplier effect is the increase in AD when private spending augments the effect of expansionary fiscal policy." is true.

The Multiplier Effect Is the Increase in AD When Private