Question
The spending multiplier effect is the result of a movement along the aggregate expenditures (AE) line.
True
False
True
False
Answers
GPT-5 mini
False.
The spending multiplier arises from a shift in the autonomous component of aggregate expenditures (e.g., an increase in investment or government spending) that raises equilibrium output by more than the initial change. Movement along the AE line reflects changes in output that cause induced consumption, but the multiplier is the amplified response to a shift in the AE schedule.
The spending multiplier arises from a shift in the autonomous component of aggregate expenditures (e.g., an increase in investment or government spending) that raises equilibrium output by more than the initial change. Movement along the AE line reflects changes in output that cause induced consumption, but the multiplier is the amplified response to a shift in the AE schedule.