Consider the basic AD/AS model in the short run. When there is a change in autonomous desired expenditure, the simple multiplier is equal to the
A)ratio of the vertical shift of the AD curve to the change in autonomous expenditure.
B)product of the horizontal shift of the AD curve times the change in autonomous expenditure.
C)product of the vertical movement along the AD curve times the change in autonomous expenditure.
D)ratio of the vertical movement along the AD curve to the change in autonomous expenditure.
E)ratio of the horizontal shift of the AD curve to the change in autonomous expenditure.

Question

Quizplus · Accepted Answer

The simple multiplier is the ratio of the horizontal shift of the AD curve to the change in autonomous expenditure, reflecting how much output changes in response to a change in autonomous spending.

Consider the Basic AD/AS Model in the Short Run