When government spending is added to the basic macroeconomic model, the multiplier for G would
A)be higher than the multiplier for autonomous spending.
B)be lower than the multiplier for autonomous spending.
C)be equal to the multiplier for autonomous spending.
D)have no relationship to the autonomous spending multiplier.

Question

Quizplus · Accepted Answer

The multiplier for government spending (G) is equal to the multiplier for autonomous spending in the basic macroeconomic model because both types of spending have a direct initial impact on aggregate demand, which then gets amplified through the economy in a similar manner.

When Government Spending Is Added to the Basic Macroeconomic Model