The spending multiplier is the ratio of the change in real GDP to
A)a shift in the expenditure line.
B)a movement along the expenditure line.
C)a shift in the 45-degree line.
D)a change in marginal propensity to consume.
E)a change in potential GDP.

Question

Quizplus · Accepted Answer

The spending multiplier is the ratio of the change in real GDP to a shift in the expenditure line. This concept is used to measure the effect of fiscal policies on the economy, where a shift in the expenditure line reflects changes in autonomous spending that can be amplified throughout the economy.

The Spending Multiplier Is the Ratio of the Change in Real