For any given increase in spending that is not directly caused by an increase in income,the impact on equilibrium GDP is greater than the initial spending increase.

Question

Quizplus · Accepted Answer

This is known as the multiplier effect, which refers to how an initial increase in spending leads to additional rounds of spending as the recipients use the money to make purchases, causing a chain reaction that leads to a larger overall increase in GDP than the initial spending.

For Any Given Increase in Spending That Is Not Directly