The practical significance of the spending multiplier is that it:
A)brings about an equality of injections and withdrawals
B)keeps inflation within tolerable limits
C)magnifies initial changes in spending into larger changes in real output
D)helps to stabilize the economy
E)minimizes the unemployment rate

Question

Quizplus · Accepted Answer

The spending multiplier is a measure of the effect that an initial change in spending has on the economy as a whole. It shows how much the final impact on output will be, given a certain increase or decrease in spending. Therefore, by magnifying initial changes in spending into larger changes in real output, the spending multiplier can help to stimulate the economy and create more jobs.

The Practical Significance of the Spending Multiplier Is That It