The multiplier effect
A) reinforces the negative effects of any reduction in spending.
B) explains what causes a recession.
C) explains how the economy recovers from a recession.
D) has no impact on equilibrium expenditure.
E) explains what causes an expansion.

Question

Quizplus · Accepted Answer

The multiplier effect amplifies the impact of a change in spending, meaning a reduction in spending can lead to a larger decrease in overall economic activity, reinforcing negative effects.

The Multiplier Effect