The multiplier effect of fiscal policy means that a change in government spending:
A) has a larger impact on output than the size of the change in spending.
B) leads to a change in the money supply that is a multiple of the spending change.
C) has a bigger impact on the budget balance than the size of the spending change.
D) has more impact on the number of jobs than on GDP.

Question

Quizplus · Accepted Answer

The multiplier effect of fiscal policy refers to the phenomenon where an initial change in government spending results in a larger total increase in national income and output. This occurs because the initial spending generates income for those who receive it, who then spend a portion of this income, further increasing aggregate demand and income in a virtuous cycle.

The Multiplier Effect of Fiscal Policy Means That a Change