Final answer:
The multiplier is related to a change in autonomous expenditure and its amplified effect on the equilibrium expenditure and real GDP. This concept, crucial in Keynesian economics, demonstrates how spending changes can proportionately affect the country's GDP through the ripple effect of household consumption.
Step-by-step explanation:
The multiplier is the amount by which a change in autonomous expenditure is magnified or multiplied to determine the change in equilibrium expenditure and real GDP. The correct answer is A. autonomous; the change in equilibrium expenditure and real GDP. When autonomous spending changes, it has a ripple effect throughout the economy due to the consumption patterns of individuals and businesses. This ripple effect is quantified using the expenditure multiplier, which is determined by the marginal propensity to spend.
The marginal propensity to spend indicates how much out of each additional dollar of income households will spend rather than save. This spending in turn generates additional income for others, leading to a multiplied effect on the overall economy. The formula to calculate the multiplier is 1/(1-marginal propensity to spend), and the greater the marginal propensity to spend, the larger the multiplier effect will be, leading to a more than proportionate change in real GDP.
In an expenditure-output diagram, the axes typically represent levels of expenditure and output (real GDP).