If autonomous spending decreases, then
A) the expenditure multiplier means that equilibrium expenditure decreases by a larger amount.
B) equilibrium expenditure does not change.
C) equilibrium expenditure decreases by the same amount.
D) the expenditure multiplier means that equilibrium expenditure increases by a larger amount.
E) the expenditure multiplier means that equilibrium expenditure increases by a smaller amount.

Question

Quizplus · Accepted Answer

The expenditure multiplier amplifies the effect of a change in autonomous spending on the overall equilibrium expenditure. Therefore, if autonomous spending decreases, the expenditure multiplier ensures that the equilibrium expenditure decreases by a larger amount than the initial decrease in autonomous spending.

If Autonomous Spending Decreases, Then