Which of the following correctly describes the multiplier in an economy?
A) It is a measure of how much consumption increases as consumers' income grows.
B) It is a measure of how much output grows following an increase in autonomous
C) It is a measure of how much consumption falls as savings increases.
D) It is a measure of how much investment increases as the interest rate falls.

Question

Quizplus · Accepted Answer

The multiplier effect in an economy refers to the increase in final income arising from any new injection of spending. The most common form of this is associated with government spending or investment, which leads to an increase in output larger than the initial amount spent. Thus, option B correctly describes the multiplier as it measures how much output grows following an increase in autonomous spending (such as government spending, investment, etc.).

Which of the Following Correctly Describes the Multiplier in an Economy