The multiplier effect indicates that
A) the aggregate demand curve is downward sloping.
B) a change in any autonomous component of aggregate expenditure is buffered by the multiplier effect
C) a change in income causes a magnified change in investment.
D) a change in any autonomous component of aggregate expenditure brings about a magnified change in income.

Question

Quizplus · Accepted Answer

The multiplier effect is the idea that a change in any autonomous component of aggregate expenditure (such as investment, government spending, or consumption) brings about a magnified change in income. This occurs because the initial change in expenditure creates a ripple effect, increasing income for others, who then spend more themselves, leading to further increases in income and expenditure. Therefore, option D is the correct answer. The other options are not directly related to the multiplier effect.

The Multiplier Effect Indicates That