Discover answers to your questions with Westonci.ca, the leading Q&A platform that connects you with knowledgeable experts. Our platform provides a seamless experience for finding reliable answers from a network of experienced professionals. Join our Q&A platform to connect with experts dedicated to providing accurate answers to your questions in various fields.
Sagot :
If there is an initial (autonomous) decrease in spending, the eventual decline in aggregate demand will be much larger because of the multiplier effect.
What is Multiplier Effect ?
The multiplier effect refers to the effect on national income and product of an exogenous increase in demand.
For example, suppose that investment demand increases by one. Firms then produce to meet this demand. That the national product has increased means that the national income has increased. Consequently consumption demand increases, and firms then produce to meet this demand.
The multiplier theory refers to when an economic factor increases, it generates a higher total of other economic variables than the increase of the initial factor. When there is an autonomous change in aggregate spending more money is spent in the economy. People will earn this money in the form of wages and profits.
Thus the national income and product rises by more than the increase in investment. The multiplier effect is greater than one.
Learn more about Multiplier Effect on:
brainly.com/question/13440595
#SPJ4
Your visit means a lot to us. Don't hesitate to return for more reliable answers to any questions you may have. We appreciate your visit. Our platform is always here to offer accurate and reliable answers. Return anytime. Westonci.ca is committed to providing accurate answers. Come back soon for more trustworthy information.
