The multiplier effect causes the aggregate demand curve to shift by an amount (greater/less) than an initial change in government spending.

Answer 1

The multiplier effect causes the aggregate demand curve to shift by an amount greater than the initial change in government spending. This is because an initial increase in government spending leads to increased incomes for those directly involved, which then leads to additional spending by those individuals and businesses, creating a chain reaction of further increases in spending throughout the economy. As a result, the total increase in aggregate demand is greater than the initial change in spending.