The income-expenditure multiplier leads to greater than one-for-one changes in output when autonomous spending changes because:
A)the direct changes in spending change the income of producers which leads to additional changes in spending.
B)multiple deposits are generated when new reserves are produced through fractional reserve banking.
C)autonomous spending supports more output than induced spending.
D)planned changes in inventories signal producers to adjust the level of output.

Question

Quizplus · Accepted Answer

The income-expenditure multiplier gets its name because a one-time infusion of spending gets re-spent many times before the final effects are realized.

The Income-Expenditure Multiplier Leads to Greater Than One-For-One Changes in Output