In the NCERT glossary, the ‘autonomous expenditure multiplier’ is:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → The ratio of increase (or decrease) in aggregate output or income to an increase (or decrease) in autonomous spending
The autonomous expenditure multiplier compares the change in output with the change in autonomous spending that caused it. If autonomous spending rises by 10 and output rises by 50, the multiplier is 5.
Option (1) The ratio of total money supply to the stock of high powered money in an economy — Incorrect. This is the money multiplier. It belongs to money supply, not to output.
Option (2) The ratio of additional consumption to additional income — Incorrect. This is the marginal propensity to consume.
Option (3) The change in equilibrium output that results from a unit increase or decrease in both taxes and government spending — Incorrect. This describes the balanced budget multiplier, where taxes and government spending change together.
The money multiplier and the autonomous expenditure multiplier are different: one links money supply to high powered money, the other links output to autonomous spending.
NCERT (2026-27), Introductory Macroeconomics, Glossary: “Autonomous expenditure multiplier – The ratio of increase (or decrease) in aggregate output or income to an increase (or decrease) in autonomous spending.” “4.3.3 The Multiplier Mechanism The increment in equilibrium value of total output thus exceeds the initial increment in autonomous expenditure. The ratio of the total increment in equilibrium value of final goods output to the initial increment in autonomous expenditure is called the investment multiplier of the economy.” |