A $1 Increase in Autonomous Spending Has a Multiplier Effect

question 57

Multiple Choice

A $1 increase in autonomous spending has a multiplier effect greater than one on total expenditures and output because

• A)each expenditure is respent in the same amount continuously.
• B)overtime expenditures tend to increase.
• C)total expenditures include autonomous expenditures.
• D)each time an expenditure occurs the recipient respends a proportion of the funds.

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Definitions:

Gross Domestic Product

The total value of all goods and services produced within a country's borders in a specific time period, serving as a broad indicator of economic health.

Real GDP

The measure of a country's economic output adjusted for price changes, reflecting the true value of goods and services produced.

Aggregate Production

The total value of goods and services produced within an economy over a specific period.

Base Year Prices

Prices expressed in terms of a specific base year, used to remove the effects of inflation when comparing economic data across different years.