The expenditure multiplier occurs because
A) a change in autonomous expenditure causes real GDP to change in the opposite direction.
B) government expenditure on goods and services change by a proportional amount to government taxes.
C) a change in autonomous expenditures changes households' incomes.
D) any change in real GDP must also change the price level.
E) a change in households' incomes changes autonomous expenditure.

Question

Quizplus · Accepted Answer

The expenditure multiplier occurs because a change in autonomous expenditures (government or consumer spending) changes households' incomes. This change in income leads to a change in consumer spending, creating a chain reaction that amplifies the initial change in autonomous expenditure, resulting in a greater change in real GDP overall.

The Expenditure Multiplier Occurs Because