IDNLearn.com offers a user-friendly platform for finding and sharing answers. Our platform offers comprehensive and accurate responses to help you make informed decisions on any topic.
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
We value your participation in this forum. Keep exploring, asking questions, and sharing your insights with the community. Together, we can find the best solutions. Your search for solutions ends here at IDNLearn.com. Thank you for visiting, and come back soon for more helpful information.
