The multiplier is greater than 1 because the change in autonomous expenditure leads to __________.
A) more saving
B) less consumption expenditure
C) more investment
D) more induced expenditure

Question

Quizplus · Accepted Answer

The multiplier effect is caused by induced expenditure, which occurs when an initial change in autonomous expenditure (such as an increase in government spending) leads to a chain reaction of increased spending as the recipients of that spending in turn spend money, creating a ripple effect throughout the economy. This leads to a greater increase in overall spending than the initial change in autonomous expenditure, and therefore a multiplier effect that is greater than 1.

The Multiplier Is Greater Than 1 Because the Change in Autonomous