The aggregate demand multiplier effect says that an initial increase in expenditure plans leads to an induced
A)increase in consumption expenditure.
B)increase in production expenditure.
C)increase in government expenditures on goods and services.
D)decrease in the price level.
E)increase in exports.

Question

Quizplus · Accepted Answer

The aggregate demand multiplier effect suggests that an initial increase in expenditure plans (such as government spending or consumer spending) will lead to an increase in overall aggregate demand. This is because the recipient of the initial spending will spend some of the money themselves, which leads to further increases in demand. The increase in overall demand is reflected in an increase in consumption expenditure.

The Aggregate Demand Multiplier Effect Says That an Initial Increase