Due to the ________ effect, the final shift in aggregate demand is larger than the initial shift in aggregate demand.
A) income
B) multiplier
C) substitution
D) crowding-out

Question

Quizplus · Accepted Answer

The multiplier effect refers to the situation where an initial shift in aggregate demand causes a larger shift in the equilibrium level of output and prices. This is because the initial increase in demand creates a chain reaction of spending, with each round of spending leading to additional rounds of spending. This results in a larger overall increase in aggregate demand.

Due to the ________ Effect, the Final Shift in Aggregate