Question

the expenditure multiplier concept of the aggregate-expenditures model: select one: a. reverses the shift of the aggregate demand curve b. magnifies the shifts of the aggregate demand curve c. explains movement up or down the aggregate demand curve d. is not at all relevant in the ad-as model

Answer 1

The expenditure multiplier concept magnifies the shifts of the aggregate demand curve in the AD/AS model, indicating that changes in spending lead to amplified changes in GDP. The correct answer is option: b. magnifies the shifts of the aggregate demand curve.

Step-by-step explanation:

The expenditure multiplier concept in the Keynesian aggregate-expenditure model magnifies the shifts of the aggregate demand curve. When government or private sector spending increases, it not only directly affects the level of aggregate demand but also produces a multiplied effect on real GDP, known as the expenditure multiplier.

This concept is clearly visible within the framework of the AD/AS model, reflecting how a change in spending can lead to a greater than proportional change in GDP, thus resulting in magnified shifts in the aggregate demand curve.