When autonomous expenditure increases, equilibrium aggregate expenditure
A) decreases by a greater amount due to the multiplier.
B) increases by a greater amount due to the multiplier.
C) increases by an equal amount.
D) decreases by an equal amount to offset the unplanned portion.

Question

Quizplus · Accepted Answer

When autonomous expenditure increases, equilibrium aggregate expenditure will also increase due to the multiplier effect. The multiplier effect occurs when a change in autonomous expenditure leads to a larger change in equilibrium aggregate expenditure. This means that the increase in equilibrium aggregate expenditure will be greater than the initial increase in autonomous expenditure.

When Autonomous Expenditure Increases, Equilibrium Aggregate Expenditure