The expenditure multiplier explains how a change in
A) real GDP leads to a change in autonomous expenditure.
B) induced expenditure leads to a change in real GDP.
C) autonomous expenditure leads to a change in real GDP.
D) real GDP leads to a change in induced expenditure.
E) induced expenditure leads to a change in autonomous expenditure.

Question

Quizplus · Accepted Answer

The expenditure multiplier measures the change in real GDP that results from a change in autonomous expenditure, such as government spending or investment. Induced expenditure, which is driven by changes in income and consumption, can amplify the initial impact on real GDP through the expenditure multiplier effect. However, the multiplier is ultimately based on changes in autonomous expenditure.

The Expenditure Multiplier Explains How a Change in