The multiplier effect applies to any
A) change in autonomous investment but not autonomous consumption.
B) change in autonomous consumption but not autonomous investment.
C) change in both autonomous consumption and autonomous investment.
D) change in any source of spending other than consumption and investment.

Question

Quizplus · Accepted Answer

The multiplier effect is the increase in total output or income that results from an increase in autonomous spending (i.e., spending that is not influenced by changes in income or output). Autonomous consumption and autonomous investment are both sources of autonomous spending, so the multiplier effect applies to changes in both. Option A and B are incorrect as they only apply to one source of autonomous spending. Option D is incorrect as the multiplier effect applies to all sources of spending including consumption and investment.

The Multiplier Effect Applies to Any