When autonomous expenditure changes, the horizontal distance by which the aggregate demand curve shifts
A) depends on the size of the multiplier.
B) depends on the size of the wealth effect.
C) is increased by the existence of automatic stabilizers.
D) is determined by the inverse of the multiplier.

Question

Quizplus · Accepted Answer

The horizontal distance by which the aggregate demand curve shifts when autonomous expenditure changes depends on the size of the multiplier. The multiplier effect amplifies the initial change in spending, leading to a larger shift in aggregate demand.

When Autonomous Expenditure Changes, the Horizontal Distance by Which the Aggregate