The multiplier shows that as ________ changes, real GDP changes by a ________ amount.
A) induced expenditure; larger
B) induced expenditure; smaller
C) autonomous expenditure; larger
D) autonomous expenditure; smaller

Question

Quizplus · Accepted Answer

The multiplier effect in economics refers to the phenomenon where an initial change in autonomous expenditure (such as government spending, investment, or exports) leads to a more than proportional change in the real GDP. This is because the initial expenditure creates income for others, who then spend a portion of that income, creating further income, and so on.

The Multiplier Shows That as ________ Changes, Real GDP Changes