When expansionary fiscal policy increases income and consumer spending, the subsequent increase in AD is called the ________ effect.

Question

Quizplus · Accepted Answer

The increase in AD resulting from expansionary fiscal policy is not just a one-time increase; it leads to a chain reaction of further increases in spending, as the increase in income leads to more spending, which leads to more income, and so on. This is known as the multiplier effect.

When Expansionary Fiscal Policy Increases Income and Consumer Spending, the Subsequent