The multiplier is greater than 1 because a change in autonomous expenditure leads to
A)more investment.
B)more induced expenditure.
C)move saving.
D)more exports.
E)even more autonomous expenditure.

Question

Quizplus · Accepted Answer

The multiplier effect arises due to induced expenditure, which is the additional spending resulting from an initial change in autonomous expenditure. As a result, when autonomous expenditure increases, it leads to a greater increase in induced expenditure, resulting in a larger overall increase in aggregate demand. Therefore, the correct choice is B, as an increase in autonomous expenditure leads to more induced expenditure, which results in a multiplier effect greater than 1.

The Multiplier Is Greater Than 1 Because a Change in Autonomous