Question
The expenditure multiplier is equal to 1 divided by _____________, when consumption is the only component of aggregate expenditures.
Step 1
It shows the total change in real GDP that results from a change in autonomous spending. When consumption is the only component of aggregate expenditures, it means that there are no other components such as investment, government spending, or net exports. In this Show more…
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The sum of the government expenditure multiplier and the tax multiplier will always be equal to unity.
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