Why will an increase in autonomous expenditure in d aggregate expenditure model cause a multiplier effect…?
Why will an increase in (desired level of investment based on long-term profit expectations) in the aggregate expenditure model cause a multiplier effect upon GDP. What determines the size of this multiplier? From what I understand, as the autonomous expenditure is the desired level of investment based on long term profit expectation, if it is increased then that means there is an increase in the profit expectation, meaning more money entering the economy, thus multiplying GDP. “A change in autonomous expenditure results in a change in equilibrium income that is a multiple of the initial change.” You may find having a flick through this PowerPoint useful?
