The change in total output that occurs following a change in nonincome-determined spending is:
A) referred to as the multiplier effect.
B) larger than the change in nonincome-determined spending.
C) due to the fact that the nonincome-determined spending creates income, which in turn is spent.
D) all of the above.

Question

Quizplus · Accepted Answer

The multiplier effect refers to the phenomenon where an initial change in spending (nonincome-determined spending) leads to a larger change in total output. This is because the initial spending creates income for others, who then spend a portion of this income, creating further income and spending in a virtuous cycle.

The Change in Total Output That Occurs Following a Change