When an initial spending change causes a larger change in overall output, this exemplifies:
A) the multiplier effect.
B) crowding out.
C) the income effect.
D) the substitution effect.

Question

Quizplus · Accepted Answer

The multiplier effect refers to the idea that an initial change in spending (government, consumer, or investment) can cause a larger change in overall output or GDP. This occurs because the initial spending stimulates further spending and economic activity, creating a ripple effect throughout the economy.

When an Initial Spending Change Causes a Larger Change in Overall