Question

The expenditure multiplier is the ratio between which two measures?

a) Government spending and net exports.
b) Consumption and investment.
c) Initial change in spending and the resulting change in the aggregate output.
d) Tax revenue and disposable income.

Answer 1

The expenditure multiplier is the ratio between the initial change in spending and the resulting change in aggregate output. It measures the impact of an initial change in spending on the overall economy.

Step-by-step explanation:

The expenditure multiplier is the ratio between the initial change in spending and the resulting change in aggregate output. It measures the impact of an initial change in spending on the overall economy. For example, if the expenditure multiplier is 2, a $100 increase in spending would lead to a $200 increase in aggregate output.