Which of the following is INCORRECT?
A) Expansions usually begin with an increase in autonomous spending.
B) Firms experience unplanned decreases in inventories as expansions begin.
C) Firms increase production in response to unplanned decreases in inventories.
D) The multiplier dampens the increase in income that occurs during expansions and brings the economy to a new equilibrium GDP.

Question

Quizplus · Accepted Answer

The multiplier actually amplifies the increase in income during expansions, not dampens it. It magnifies the initial increase in autonomous spending through a chain of consumption and investment, leading to a larger increase in equilibrium GDP.

Which of the Following Is INCORRECT