The expenditure multiplier concept of the aggregate-expenditures model:
A) Is not at all relevant in the AD-AS model
B) Magnifies the shifts of the aggregate demand curve
C) Explains movement up or down the aggregate demand curve
D) Reverses the shift of the aggregate demand curve

Question

Quizplus · Accepted Answer

The expenditure multiplier concept refers to the idea that a change in autonomous expenditure will have a greater impact on aggregate demand than the initial change. This magnification effect is what causes the shifts in the aggregate demand curve to be more significant, making choice B the correct answer.

The Expenditure Multiplier Concept of the Aggregate-Expenditures Model