Increases in autonomous expenditure induce ________ in aggregate expenditure thereby making the multiplier ________.
A) further increases; greater than one
B) further increases; less than one
C) a decrease; greater than one
D) a decrease; less than one
E) further increases; unnecessary

Question

Quizplus · Accepted Answer

Autonomous expenditure refers to spending that is not influenced by changes in income. When autonomous expenditure increases, it directly increases aggregate expenditure. This, in turn, triggers a chain reaction of further increases in expenditure through the multiplier effect. Therefore, with an increase in autonomous expenditure, aggregate expenditure and the multiplier will both increase.

Increases in Autonomous Expenditure Induce ________ in Aggregate Expenditure Thereby