Because of the multiplier, a one- time change in expenditure will
A) expand income by an infinite amount.
B) generate more additional income than the initial change in expenditure.
C) have little secondary effect on income.
D) decrease saving and investment activity and future income.

Question

Quizplus · Accepted Answer

The multiplier effect means that a one-time change in expenditure will generate more additional income than the initial change. This is because the additional income earned by those who receive the initial expenditure will then spend a portion of it, which in turn generates additional income for others, and so on. This process leads to a multiplication of the initial change in expenditure, resulting in a larger overall increase in income.

Because of the Multiplier, a One- Time Change in Expenditure