Which of the following correctly describes the spending multiplier?
A) The initial change in consumption, investment, government spending, or net exports divided by the change in equilibrium GDP.
B) An initial increase in aggregate expenditures divided by the equilibrium GDP.
C) An initial increase in aggregate expenditures divided by the change in equilibrium GDP.
D) The ratio of the change in real GDP to an initial change in any component of aggregate expenditures.

Question

Quizplus · Accepted Answer

The spending multiplier is defined as the ratio of the change in real GDP to an initial change in any component of aggregate expenditures (such as consumption, investment, government spending, or net exports), which accurately describes option D.

Which of the Following Correctly Describes the Spending Multiplier