AP Macroeconomics Question 467: Answer and Explanation
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15. When a large increase in aggregate demand has an even greater increase in real GDP, economists refer to this as
- A. the balanced budget multiplier.
- B. the money multiplier.
- C. the foreign substitution effect.
- D. the wealth effect.
- E. the spending multiplier.
Correct Answer: E
E-Because an injection of dollars into the circular flow goes through the economy several times, the impact on real GDP is multiplied.