If prices are fixed, an increase in aggregate expenditures results in an increase in equilibrium GDP that
A) is greater than the change in aggregate expenditure.
B) is equal to the change in aggregate expenditure.
C) is less than the change in aggregate expenditure.
D) has no necessary relationship to the size of the change in aggregate expenditure.

Question

Quizplus · Accepted Answer

This is due to the multiplier effect, where an initial increase in spending leads to further increases in income and consumption, amplifying the initial increase in aggregate expenditure.

If Prices Are Fixed, an Increase in Aggregate Expenditures Results