The multiplier effect refers to the series of
A)autonomous increases in consumption spending that result from an initial increase in induced expenditures.
B)induced increases in consumption spending that result from an initial increase in autonomous expenditures.
C)autonomous increases in investment spending that result from an initial increase in induced expenditures.
D)induced increases in investment spending that result from an initial increase in autonomous expenditures.

Question

Quizplus · Accepted Answer

The multiplier effect refers to the induced increases in consumption spending that result from an initial increase in autonomous expenditures. This happens because when autonomous expenditures increase (for example, due to an increase in government spending or investment), income and employment in the economy also increase. As a result, people have more disposable income, and therefore, they are more likely to consume more. This, in turn, creates further increases in income and employment, leading to additional increases in consumption, and so on.

The Multiplier Effect Refers to the Series of