When investment increases, the multiplier points out that
A)real GDP decreases by a greater amount.
B)real GDP increases by a greater amount.
C)consumption increases by the same amount.
D)ultimately investment increases by more than the initial increase.
E)consumption decreases by a greater amount.

Question

Quizplus · Accepted Answer

The multiplier effect suggests that an initial increase in investment leads to a larger increase in real GDP due to the subsequent rounds of increased consumption and spending.

When Investment Increases, the Multiplier Points Out That