Holding all else constant, a change in autonomous aggregate expenditures will shift in aggregate demand by an amount equal to
A) the change in autonomous aggregate expenditures.
B) the multiplier times the change in autonomous aggregate expenditures.
C) the change in real GDP divided by the change in autonomous aggregate expenditures.
D) the multiplier.

Question

Quizplus · Accepted Answer

The multiplier effect states that a change in autonomous aggregate expenditures leads to a larger change in real GDP. The size of this change is equal to the multiplier times the change in autonomous aggregate expenditures. Therefore, a change in autonomous aggregate expenditures will shift in aggregate demand by an amount equal to the multiplier times the change in autonomous aggregate expenditures.

Holding All Else Constant, a Change in Autonomous Aggregate Expenditures