Which of the following best describes the simple spending multiplier? It shows t

Question

Which of the following best describes the simple spending multiplier? It shows the magnified change in planned aggregate spending that arises from a change in equilibrium output. It shows the magnified change in planned aggregate spending that arises from a change in output. It shows the magnified change in equilibrium output demanded that arises from a change in income. It shows the magnified change in equilibrium output demanded that arises from a given initial change in planned aggregate spending. An aggregate demand curve can be drawn by: letting changes in the price level shift the aggregate expenditure line. letting changes in autonomous spending shift the aggregate expenditure line. shifting the 45-degree line. letting changes in the level of income shift the aggregate expenditure line. An increase in the price level in an economy will. shift the aggregate expenditure line upward cause an upward movement along the aggregate expenditure line cause a downward

Explanation / Answer

C.Spending multiplier represents the multiple by which GDP changes in response to change in government expenditures and investment. a. Letting change in AE line d. Shift in Aggregate expenditure downward. Increase in price decreases real money balance and aggregate expenditure True.An expansionary gap occurs when actual ouput is more than potential output.

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