Economist John Keynes developed the aggregate expenditure model and the notion of the expenditure multiplier in the 1930s to explain the most traumatic event in economic history at that time: The Great Depression.

Q1. What is the expense multiplier? Explain how the expense multiplier works and identify the three variables that increase or decrease its value.

Q2. What is the impact of the short-term multiplier (when the price level remains constant) following an increase in government spending on:

- Autonomous expenditure

- Induced expense

- Global supply

- Global demand

- Short-term macroeconomic equilibrium

- Real GDP

Q3. Based on global supply-demand, explains why the final impact of the multiplier effect can be reduced in the short term?

Q4. Based on global supply-demand, explains what happens if the expenditure multiplier results in real GDP greater than potential real GDP?