The multiplier effect means that a given change in ________ expenditures will change equilibrium ________ by an amount ________ than the initial change in autonomous expenditures.

Question

Quizplus · Accepted Answer

The multiplier effect refers to the increase in overall economic output and income that results from an initial increase in autonomous expenditures (such as government spending or investment). This increase in overall income is greater than the initial increase in autonomous expenditures, so the answer is A - autonomous expenditures will change equilibrium income by an amount greater than the initial change in autonomous expenditures. Choice B is incorrect because it suggests that the multiplier effect would result in a decrease in equilibrium income, which is not the case. Choices C and D refer to induced expenditures, which are driven by changes in income, rather than autonomous expenditures, which are not.

The Multiplier Effect Means That a Given Change in ________