What is the expenditure multiplier?
Understand the Problem
The question is asking about the concept of the expenditure multiplier, which is a key idea in economics that refers to the ratio of a change in national income to the change in government spending that causes it. The user is likely looking for an explanation of what it is and how it functions within economic theory.
Answer
The expenditure multiplier measures the impact of a change in autonomous spending on total spending and aggregate demand.
The final answer is the expenditure multiplier measures the impact of a change in autonomous spending on total spending and aggregate demand.
Answer for screen readers
The final answer is the expenditure multiplier measures the impact of a change in autonomous spending on total spending and aggregate demand.
More Information
The expenditure multiplier is pivotal in fiscal policy, helping economists understand the broader economic impact of changes in government spending or taxation.
Tips
A common mistake when calculating the multiplier is confusing autonomous spending with induced spending. Ensure you are using autonomous spending changes only.
Sources
- The web page with info on - Example Source - pl.khanacademy.org
- The Expenditure Multiplier Effect | Macroeconomics - courses.lumenlearning.com
