The spending multiplier tells us the:
A) amount by which GDP increases when spending increases by $1.
B) amount by which GDP decreases when spending on capital goods increases by $1.
C) fraction of each dollar that will decreases GDP of each dollar spent.
D) amount by which spending increases when GDP increases by $1.

Question

Quizplus · Accepted Answer

The spending multiplier is the amount by which GDP increases when spending increases by $1. It measures the impact of changes in expenditures on aggregate demand and subsequently on GDP.

The Spending Multiplier Tells Us The