The larger change in total output that results from a change in nonincome-determined spending is caused by the:
A) expansion effect.
B) multiplier effect.
C) re-spending effect.
D) circular-flow effect.

Question

Quizplus · Accepted Answer

The multiplier effect explains how an initial change in spending leads to a larger change in total output. This is because the initial spending generates income for others, who then spend a portion of that income, leading to further increases in spending and income in the economy.

The Larger Change in Total Output That Results from a Change