The multiplier effect exists because a change in autonomous expenditure
A) leaves the economy in the form of imports.
B) leads to changes in income, which generate further spending.
C) prompts further exports.
D) will undergo its complete effect in one round.

Question

Quizplus · Accepted Answer

The multiplier effect occurs because an initial change in spending (autonomous expenditure) leads to further changes in income and thus generates additional spending. This cycle of spending and income generation continues, amplifying the initial change in expenditure throughout the economy.

The Multiplier Effect Exists Because a Change in Autonomous Expenditure